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Profits No matter what anyone says, you are in business to make a profit . To be sure that you are making a profit , you need to consider the following items: Markup vs Margin. Markup is the percentage by which you increase the cost price of an item to get to the selling price. Many people make the serious mistake of thinking that markup is the most important item to be calculated. Margin is the percentage of the profit divided by the selling price. This is a far more important number than markup. For example – we have a widget which costs R 10.00 – we mark it up by 30%, and thus sell it for R 10.00 + 30% of R 10 (R 3) = R 13.00. We now assume that since our markup is 30%, our profit is thus 30%, and we’re on the road to success. This is not the true picture. Our margin is the profit divided by the selling price = R 13 (selling price) – R 10 (cost) = R 3 divided by R 13 (selling price) = 23%. Why is margin so important ? 1. If you know your turnover, just multiply the turnover by the margin to give you, your gross profit in Rands. 2. You need to have a margin of 25%-30% or more if you are to survive in the printing business. Most large supermarkets only achieve around 11% but they are doing sales of tens of millions a month. The lower your volumes the higher your margins need to be.
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