Every entrepreneur is interested in the question of how to calculate the margin for at least two reasons. Firstly, in order to correctly carry out the pricing of your goods. Secondly, in order to calculate at what prices competitors are being purchased.
It is necessary
calculator, pen and paper
Instructions
Step 1
What is the mark-up?
Mathematically, a markup is a percentage (less often - a fixed) markup to the purchase price of a product. The markup added to the purchase price forms the final selling price. The buyer pays for it. With a sufficient volume of sales, the value of the margin should be enough for the entrepreneur not only to pay all the associated business expenses, but also to make a profit.
Step 2
We carry out pricing
Regardless of what prices the suppliers give, our final price should, above all, satisfy the buyers. Therefore, when conducting pricing, there are no clearly established premium coefficients. The margin for each type of product varies depending on many conditions.
In the current practice of trade in the retail segment, the following markups are usually applied:
• for food - from 10 to 35%
• for clothes and shoes - from 40 to 110%
• for household and office supplies - from 30 to 60%
• for souvenirs, jewelry - 100% and more
• for cosmetics - from 30 to 70%
• for auto parts - from 30 to 60%
In order to calculate the sales price, we multiply the purchase price by the markup percentage. The resulting value is added to the purchase amount. For example, a supplier brought us a bumper cover for a car for 1940 rubles. We set a 35% mark-up for the final sale.
1940 * 35% = 679
Our selling price will be 1940 + 679 = 2619 (RUB)
The markup can be calculated in reverse. To do this, we divide the selling price by the purchase price and subtract one. For example, we sell 1 kg of bananas for 45 rubles. The purchase price was 35 rubles.
Thus, the margin is 45/35 - 1 = 28.5 (%)
Step 3
Calculating the competitor's purchase prices
In order to calculate the competitor's purchase prices, we select the category of goods for comparison. Then we add a unit to the average markup for this type of product and divide the competitor's selling price by this amount.
For example, we have a direct competitor who sells footwear purchased from our supplier. We need to find out if the supplier is giving him better prices. A competitor's pair of shoes costs 3500 rubles. We know that under the terms of an agreement with a supplier, the average mark-up on shoes can be no more than 60%. We calculate the purchase price.
3500/1, 6 = 2187, 5 rubles.
By comparing several headings in this way, we get a general understanding of the competitor's purchase prices. Knowing the principles of forming a margin, it is not difficult to calculate this indicator for any product.
We hope that now you can correctly calculate the margin at any time and in any store you like.
