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Profit margins?
the pest is back with another question! 😊
I understand this will vary. but “in general” do you aim for a profit margin window, give or take 5%?
I see some companies have a low margin but always work in volume. great if you can get the work but I’m working job to job and never mega amounts. I’m just wondering how others approach this, especially as there appears to be no end to price increases.
trying to do my sums while things are slowing up for the holidays! 😃
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7 Replies
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It’s a bit of hard one to answer, two ways to look at it.
We primarily work with vehicle graphics, so for us the largest cost is wages, and overheads, so my main concern is the time element of the job.
I know what it costs to keep the place running, if it’s costing me £30 an hour to keep the door open, it’s no good spending 5 hours on a £100 job.
Similarly if you’re printing a mug or a t-shirt. The mug costs £1, add a bit of paper and the ink, and you think you can sell it for £4 – Until you account for the time involved.
If you can turn your item into a commodity/product item, and get the volume you can look at it differently.
If you know you’re making £5 on each order, and it costs £2000 a month to keep the business running (and paying your wage), you need 400 orders or 100 a week or 20 a day, to break even.
Increase your price by £5 you then only need 200, 50 a week, 10 a day.
Are those numbers achievable? How do they compare with the competition? *Also remember you don’t want to be working 5 days a week, 52 weeks of the year.
I know a few people who’ve successfully grown their business, by standardising some items, and offering set prices. To do it accurately you need to know your costs though. 👍
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i will keep my answer simple 🙂 i work on an average of 80%
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80% is similar on our wide format print. We don’t generally drop below 50%.
That’s margin too, not markup. There is a difference & is often confused🙂
https://www.sellickpartnership.co.uk/blog/2013/09/mark-up-vs-margin-dot-dot-dot
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Thats correct. Yes not everythings the same, its between 70 and 90% and ive noticed normally the bigger jobs have less margin. Overall at the end of the year i find it averages around 80% profit margin BUT i have very little in the way of overheads so if i had rent,rates and bills then it would be lower but im assuming you always need to end the year with atleast 60% +
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Our margins are lower on items we buy in (leaflets etc) I work the margin out job by job.
I use a spreadsheet similar to this one (not our figures), to record all our overheads.
It will give you the cost per hour, day, or week. Use that to work out day rates, hourly rates, or what sales you need to achieve a day/week.
I went through this with a friend who was having a tough time, they were trying to compete with cheaper companies, and doing this exercise was an eye opener for them. Instantly these little jobs he was spending hours travelling into the city to do for £80 weren’t worth doing, taking up valuable time, and likely costing him money.
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thank you ever so much for the replies David and Martyn. that was really good of you both, especially the spreadsheet david. thank you!
I am going to have a read back over this and also the sheet and come back to you. probably with more pricing questions! 😳😇
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You’re more than welcome.
I wish more people understood their costs and priced correctly.
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