And now for something completely different, – Monty Python!
Here is a simple test to check your numbers.
Do you know your margin and mark-up?
Even some accountants struggle to explain this.
Many business owners believe that if they mark-up their product by 20% that their margin is the same.
No.
In this case 20% mark-Up will produce a profit margin of 16.7%!
It is important you know this. Otherwise you could end up not making any profits.
Here is a worked explanation.
Mark-up is based on cost.
Widget A costs 100.
Your MARK UP is 20 (20%)
Your selling price is 120.
Your MARGIN is based on sales.
Selling price 120
Profit 20
Margin 16.7% (20/120 %)
Hope this explains.
Don’t let me baffle you!
+ Ravi Peal-Shankar
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