One of the fundamental necessities of business is selling at the correct price. Pricing is part art and part science and the Quick Profit app can help with the science. You must use your intuition, experience and knowledge of what your competitors are charging to arrive at your own selling price. Over time successful businesses will establish a benchmark gross profit percentage that they aim for with any products they stock. If it is too low you will not cover the cost of your product, too high and you run the risk of not selling your product. If you get it wrong either way you may soon be out of business.
Some use markup to calculate selling price and some use margin, this can cause confusion but it is important to understand these differences to accurately price your product. Markup percentage This is the percentage you add to the cost price to get the selling price. Gross Profit Percentage This is the percentage of the selling price that is profit. It is important not to confuse these two percentages and they are very different. If you buy a product for £1 and sell it for £2 that is a 100% markup but it is a 50% margin. Markup: You have added 100% of the cost price to the cost price Margin: 50% of the selling price is profit. |
This example is simplistic and does not take into account VAT or if you buy a case and need to calculate the selling price per unit but the Quick Profit app can easily work this out for you.
Gross profit does not take into account overheads such as wages, rates, rent and other fixed costs. These will need to be deducted to calculate the nett profit.
Gross profit does not take into account overheads such as wages, rates, rent and other fixed costs. These will need to be deducted to calculate the nett profit.