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  • Writer's pictureJoel White

Case Study: How to Turn $5 into $1,000,000

A case study in real financial leverage (not the Silicon Valley Bank kind):

One of my first clients came to me in late 2021 to review their planned rate card changes for the upcoming year. While they knew costs were increasing and thus needed to increase rates to some degree to maintain margins, they were also looking to expand geographically and were concerned about pricing themselves out of new business opportunities in that region.

Like most service providers, a large percentage of their pricing boiled down to a small number of rate decisions. This factor is especially pronounced in expansion scenarios.

Our final discussions came down to a single rate in their new territory that would drive 60%-70% of their pricing. Their planned hourly rate increase was $5 lower than my recommendation. The client was convinced the recommended rate was perfectly competitive yet felt the need to be "on the low side" to win more business. I said the decision was of course theirs to make but to ask themselves whether being on the low side was ever actually going to win them business.

A year later the client re-engaged me for their annual pricing review. I noticed they had adopted the higher recommended rate the year before. Based on their new business the preceding year and the typical timeframe of their projects, we estimated that the $5 difference in that one single rate had at the very least a $1m incremental benefit to their business that year, and that benefit will continue in future years and beyond.

This type of benefit is one of the few that meets my "financial trifecta" criteria. That $1m directly translates to:

  • $1m in top line revenue

  • $1m in gross margin

  • ~$1m in EBITDA margin

When's the last time $5 netted your $1m?



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