“There’s no difference between markup and margin – it’s the same thing”- Anonymous Chicago shop owner
In a recent conversation with a shop owner, the subject of margins and markup came up. He insisted there was no difference.
I asked, “If I buy a part for $12.00 and want to achieve a 55% gross profit margin, how much would I charge?”
After some tapping on the calculator keys, the shop owner replied, “$18.60″… which is a very common answer.
Unfortunately, in today’s fiercely competitive recessionary business climate – with the rising cost of doing business and tightening credit – this answer will tend to get your phone disconnected.
An overall gross profit margin of 55% is not at all unreasonable with today’s overhead… in fact, you would be hard pressed to survive the ups and downs of economic cycles with much less.
So here’s the question: How much do I need to sell the $12.00 part for to achieve a 55% gross profit margin?
Please post your $ answer in the ‘comments’ section below
