Blog
Margin Vs Markup
by Josh Govindin Pricing
3 Nov 2009 | 1 Comment
There appears to be some confusion amongst (especially retail) clients how to calculate the final selling price for their products. If you calculate your price incorrectly you will either be at a disadvantage against your competitors or undercutting yourself and squeezing your profitability. It is important to know which is the right way for your business. The best way to illustrate the final impact of margin vs. markup is with an example.
Cost Price = $500
30% Margin vs. 30% Markup
30% Margin
$500 / (100% - 30%/ 100)
$500/ 0.70 = $714.29
30% Markup
$500 x 30% = $150
$500 x (100%+30%/100) = $650 (1.3 or 130%)
$500 + $150 = $650
Difference between 30% Margin and 30% Markup at a cost price of $500 is $64.29 ($714.29 - $650)
The 30% Markup is actually a 23.08% Margin.
If you are not sure if you are working out your prices correctly contact us and we can go through it with you. The profitability of your business is VERY SENSITIVE TO PRICING. You could be working very hard but not reaping your full potential.
Comments (1)
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