For example, product manufacturers, in addition to the factors listed above, must take into account the costs of delivery to points of sale. Small online stores can do without renting japan phone number retail outlets, so they do not include this expense item in calculating the markup.
Tax burden
When calculating the markup, a business must also take into account tax payments. Otherwise, sales may be unprofitable. The following factors affect the amount of tax payments:
legal form of enterprise organization;
tax regime;
type of economic activity;
total sales volumes, etc.
Tax burden
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Along with the main taxes, individual entrepreneurs are required to pay a number of insurance premiums. Additional tax deductions may also arise (transport and land tax, property tax, etc.). The business takes all these expenses into account when calculating the markup.
It is worth noting that added value is not always rational. For example, there is a phenomenon of prestige consumption. Luxury brand goods are sold at a significantly inflated price. In this case, the markup will also be increased, since the buyer "pays for the brand."
Important! Businesses must accurately determine their threshold prices. This is the minimum sales price at which the company will not incur losses.
You can set a single markup for the entire product line or apply a separate coefficient for each product category.
Formula for calculating the markup
The following formula will help you calculate the optimal markup for manufacturing and retail enterprises:
H = (VP : C) × 100%,
Here H is the markup, GP is the gross profit, C is the cost of goods sold. Gross profit is calculated by subtracting the total cost of production from the actual or planned sales volume.
Using this formula, you can calculate both the general markup for all goods and for individual product categories.
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What influences the amount of trade margin?
Example : In April, the bread factory's revenue was 133 thousand rubles. The cost of goods sold for that month was 47 thousand rubles.
Let's calculate the markup using the formula: ((133,000 – 47,000) / 47,000) × 100% = 183%.
The bakery's markup in our example is 183%.
For such calculations, it is recommended to take a period of one or two quarters or even a year, since calculating the retail markup on a product separately for each month does not make sense.
Compare the data obtained. If they differ by more than 20%, calculate the markup based on the annual sales volume. If the figure obtained is less than 20%, use the sales volume of the last month as a basis and maintain this markup for 6 months. After that, the added value can be adjusted using the formula above.