The profit margin is an indicator that assesses the profitability of your business. We must not only learn to calculate, but above the forecast.Because it will be essential in the development of your business strategy.

You wonder at what price to sell your services or products for a margin interesting? Finding the right balance to make profits without discouraging your clients to buy? The calculation of the profit margin is essential to help. The key indicator used to assess the potential and profitability of your business.It is the difference between the selling price of your goods and their acquisition cost.In other words, the profit margin is the amount available to a company to meet all its expenses: rent, insurance, wages, and repayment of loans,It is therefore essential to know the encryption, but also to optimize it.

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Calculate its profit margin is, first, estimate the amount of overhead costs .For this, we must identify the positions and accumulate costs: electricity, rent, insurance, transportation, travel, postage, telecommunications, bank charges, plus taxes and fees.Step Two: Setting the sale price, taking into account overhead and desired final margin. Be careful to remain vigilant on the development of small items.Unitarily, their value is rather low, but when you earn over the year, the shortfall, if you forget or underestimate may be important.

Use occupational statistics

To locate your margin compared to your competitors, you can also press the occupational statistics by activity, available from your accounting firm. a shop of ready-to-wear, like a florist, an average margin of 48%, while a shoe business, he does only 40% margin. The margin, resulting from these statistics may mask very different realities in the same activity. It does not qualify alone, the performance of the company.”The difference between the margin of a florist and the low cost of a florist designer due to the added value of creative work,but also by the quality of high-end products used to make different compositions,

Know negotiate with suppliers

More generally, control of your mark-up allows you to boost the profitability of your business. For example, you can increase your profit margin by reducing the purchase price of your goods.How?By diversifying your suppliers and negotiating discounts with them. “The professional must also ask the right questions, understand the importance the customer attaches to the product and consider its commercial position.What is the target audience? What differentiates me from my competitors? Is the quality of my services, my advice or the amplitude of my hours? Analysis essential to maximize your profit margin. A good leader is above all a good manager.

Calculate the gross margin

The profit margin is a key indicator of the activity of a company. It is the difference between the price of items sold and the cost of purchasing the goods.

Here’s how it is calculated:
Margin = Selling price of goods – purchase cost of raw materials and supplies + / – Changes in inventories of goods.