Markups & Margins

Ever wondered why 3 out of 4 small business fail in the first 5 years? Even while sales are constant or rising - their profitability diminishes over time.

How does this happen? Well business is both an art and science and there are many complex parameters that underpin what appears to be a simple transaction of buying and selling products or services.

Knowing the mark-up for a particular margin is one thing; knowing what you should charge is another all together. You need to nominate your own RRP's based on your Marketing Strategy (See Marketing Essential).

Where do i start?

A great way to get started is to simply work out how much you need to make to break even on each sale.

Margin

The Margin is a percentage of the selling price. It tells you what percentage profit you’ve made on a sale, before taking your other costs into account:

The Mark Up however, is a percentage of the cost price. It’s the amount that you add to the cost of an item to reach its selling price, and it’s calculated like this: