PCIB Calculator
Price Change Impact on Bottom-line & Breakeven Volume Analysis
What is a PCIB Calculator?
The PCIB (Price Change Impact on Bottom-line) Calculator is a strategic business tool designed to help managers and business owners understand the direct relationship between price adjustments and profitability. Unlike simple revenue calculators, the PCIB focus is on the unit margin and the volume elasticity required to maintain your current bottom-line profit.
How Does Price Affect Your Profit?
When you change the price of a product or service, two things happen: your margin per unit changes, and your sales volume usually shifts. The PCIB calculation tells you exactly how much sales volume you can afford to lose if you raise prices, or how much more you must sell if you lower prices, to stay at the same profit level.
The Core Formula:
Breakeven Volume Change % = (Current Unit Margin / New Unit Margin) - 1
Practical Example
Imagine you sell a gadget for $100 with a variable cost of $60. Your current margin is $40. You want to raise the price to $110.
- New Margin: $110 – $60 = $50.
- Calculation: ($40 / $50) – 1 = -0.20 or -20%.
This means you can lose up to 20% of your sales volume at the new price and still make the same total profit as before. If your sales drop less than 20%, your total profit actually increases.
Why Business Owners Use This Tool
- Risk Assessment: Evaluate the danger of a price war or a steep price hike.
- Margin Protection: Understand how rising raw material costs (Variable Costs) shrink your margins.
- Strategic Planning: Determine if a "high volume, low price" or "low volume, high price" strategy is more sustainable for your specific cost structure.