Post by asadul8555 on Feb 25, 2024 1:27:49 GMT -8
Calculating the profit margin on sales of your product or service incorrectly can be harmful to your business, causing losses — and no one wants that, right? In addition to being enough to cover all the costs you had to produce the product, the sales price must also include all the expenses and costs you had to sell it and, obviously, still generate a profit. Even though we are talking about a loss of R$0.10 on sales, when we multiply it by the number of products sold, we already add up to a large loss in volume. Even worse if the loss per product is even greater. How to calculate profit margin We need to understand the sales price as the sum of these three factors: Costs you incurred: amounts paid to your suppliers to produce the product. Expenses: what you spent on sales and the administrative and structural part, to sell the product. The profit margin: the return that your company will receive when selling the product. What allows the business to grow is the profit margin.
That's why it's important to know how to calculate it. Shall we look at practical examples? How to calculate profit margin on service To begin with, let's not think about a product, but about a service. Imagine an event producer. Think about the cost you have with the salaries of the professionals involved in making the event happen and suppliers. Let's assume that this cost is R$10,000 and the expense, with commissions, taxes and fixed expenses, such as water, electricity and rent, is R$3,600. You set a profit margin Asia Phone Number List of 30% on the cost, that is, R$3,000. Shall we add it up? ICosts + Expenses + Profit = Sales Price R$10,000 + R$3,600 + R$3,000 = R$16,600 R$16,600 is enough to pay all costs and expenses involved and a profit margin of 30% is guaranteed. How to calculate profit margin on product What if it was a product? Let's imagine a bakery. Think of the product as a pie. In this case, you need to think: In the costs of pie ingredients and the pastry chef's salary proportionally, which we will assume is R$20. In expenses with taxes and water, electricity and rent, as in the previous example, in addition to attendants to sell the pie, which we understand will add up, proportionally, to R$10.
And in the profit margin, which we will point out as 50% of costs, that is, R$10. Adding: Costs + Expenses + Profit = Sales Price R$20 + R$10 + R$10 = R$40 This way, you can cover all the costs of producing the pie, as well as all expenses, such as attendants, taxes and the like, guaranteeing a profit margin of 50%. Bonus tip Try to observe the price your competitors charge for the same product or service. Knowing this will help you calculate the profit margin, increasing or reducing it to operate with a competitive and fair price for you and your consumer within your market. As you are the one who defines your profit margin and the company's growth depends on it, it may be tempting to set a high profit margin, but a series of factors must be taken into consideration, in addition to the competition. You can start with market research . According to Sebrae, for example, there are common averages for each sector. In industry, the profit margin is around 6% to 8%, while in commerce, it is 10% to 15%. But these values should not be taken as a rule and it is up to the entrepreneur to understand internal and external factors to define the ideal profit margin for their business.
That's why it's important to know how to calculate it. Shall we look at practical examples? How to calculate profit margin on service To begin with, let's not think about a product, but about a service. Imagine an event producer. Think about the cost you have with the salaries of the professionals involved in making the event happen and suppliers. Let's assume that this cost is R$10,000 and the expense, with commissions, taxes and fixed expenses, such as water, electricity and rent, is R$3,600. You set a profit margin Asia Phone Number List of 30% on the cost, that is, R$3,000. Shall we add it up? ICosts + Expenses + Profit = Sales Price R$10,000 + R$3,600 + R$3,000 = R$16,600 R$16,600 is enough to pay all costs and expenses involved and a profit margin of 30% is guaranteed. How to calculate profit margin on product What if it was a product? Let's imagine a bakery. Think of the product as a pie. In this case, you need to think: In the costs of pie ingredients and the pastry chef's salary proportionally, which we will assume is R$20. In expenses with taxes and water, electricity and rent, as in the previous example, in addition to attendants to sell the pie, which we understand will add up, proportionally, to R$10.
And in the profit margin, which we will point out as 50% of costs, that is, R$10. Adding: Costs + Expenses + Profit = Sales Price R$20 + R$10 + R$10 = R$40 This way, you can cover all the costs of producing the pie, as well as all expenses, such as attendants, taxes and the like, guaranteeing a profit margin of 50%. Bonus tip Try to observe the price your competitors charge for the same product or service. Knowing this will help you calculate the profit margin, increasing or reducing it to operate with a competitive and fair price for you and your consumer within your market. As you are the one who defines your profit margin and the company's growth depends on it, it may be tempting to set a high profit margin, but a series of factors must be taken into consideration, in addition to the competition. You can start with market research . According to Sebrae, for example, there are common averages for each sector. In industry, the profit margin is around 6% to 8%, while in commerce, it is 10% to 15%. But these values should not be taken as a rule and it is up to the entrepreneur to understand internal and external factors to define the ideal profit margin for their business.