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Suggest You - Why Your Profit Margin Is Not Important
Boundaries have been broken and now within a few minutes you can send money abroad. Previously sending money abroad wasn’t so easy as anyone wishing to send money abroad had to undergo various formalities. Those formalities were very grueling and involved a lot of paperwork but now t
The dollar store is working on a profit margin of up to 300%, while the car dealer is working on a profit margin of as little as 10%. Let’s further assume that the dollar store sells strictly dollar items and the car dealer focuses on $20,000 cars. Using these figures the dollar store will have to sell roughly 4,000 items to earn the same profit as the
You get what you pay for.There is much truth to this statement. If you buy a used watch on Ebay for $10, consider yourself lucky if it comes with a wristband- or hands. If you buy a jalopy for a hundred bucks from a used car salesman named Guido, cross your fingers before you
Everyone from the CEO of General Motors to your average eBay seller is focused on it.
But think fo what a profit margin actually represents. It’s not an indication of how much money you are actually making, it’s only a figure that tells what the profit portion is as a percentage of the total sale.
In other words a $10 profit on a $100 sale means that your profit margin is 10%.
Now let me ask you this, let’s assume your average profit margin is 100%. That type of profit margin would make any business owner envious. But what if the total sale was only $2? Your actual profit would only be $1, even though you are working a high profit margin.
I am sure you realize how many products you would have to sell to make any serious money.
But what if your profit margin was only 5% on a $100,000 sale?
Your actual profit would be $5,000. In net terms you are making more money even though the profit margin is 20 times smaller than in the above example.
That’s the real reason your profit margin is not important. What is important is your actual net profit.
Profit margins are good formulas for general accounting and investment decisions. But as a business owner your determining concern should be your net profit.
Need more convincing?
Let’s look at your average dollar store compared to your average car dealer.
The dollar store is working on a profit margin of up to 300%, while the car dealer is working on a profit margin of as little as 10%. Let’s further assume that the dollar store sells strictly dollar items and the car dealer focuses on $20,000 cars. Using these figures the dollar store will have to sell roughly 4,000 items to earn the same profit as the c
Sure there are pages and pages of articles telling you how this color or that music on you web page will encourage people to buy but here is the truth: The most important tool is the words that you use. Most people shop with emotions. Figure out a way to get them “emotional” and yo
In other words a $10 profit on a $100 sale means that your profit margin is 10%.
Now let me ask you this, let’s assume your average profit margin is 100%. That type of profit margin would make any business owner envious. But what if the total sale was only $2? Your actual profit would only be $1, even though you are working a high profit margin.
I am sure you realize how many products you would have to sell to make any serious money.
But what if your profit margin was only 5% on a $100,000 sale?
Your actual profit would be $5,000. In net terms you are making more money even though the profit margin is 20 times smaller than in the above example.
That’s the real reason your profit margin is not important. What is important is your actual net profit.
Profit margins are good formulas for general accounting and investment decisions. But as a business owner your determining concern should be your net profit.
Need more convincing?
Let’s look at your average dollar store compared to your average car dealer.
The dollar store is working on a profit margin of up to 300%, while the car dealer is working on a profit margin of as little as 10%. Let’s further assume that the dollar store sells strictly dollar items and the car dealer focuses on $20,000 cars. Using these figures the dollar store will have to sell roughly 4,000 items to earn the same profit as the
Getting sales leads is vital to every business. Every business has to have customers; and prospective clients are what they identify as sales leads. Even the teenage girl who is eyeing some fashionable clothes in a magazine can be considered a sales lead. The typical sales leads, how
I am sure you realize how many products you would have to sell to make any serious money.
But what if your profit margin was only 5% on a $100,000 sale?
Your actual profit would be $5,000. In net terms you are making more money even though the profit margin is 20 times smaller than in the above example.
That’s the real reason your profit margin is not important. What is important is your actual net profit.
Profit margins are good formulas for general accounting and investment decisions. But as a business owner your determining concern should be your net profit.
Need more convincing?
Let’s look at your average dollar store compared to your average car dealer.
The dollar store is working on a profit margin of up to 300%, while the car dealer is working on a profit margin of as little as 10%. Let’s further assume that the dollar store sells strictly dollar items and the car dealer focuses on $20,000 cars. Using these figures the dollar store will have to sell roughly 4,000 items to earn the same profit as the
So many contractors go out of business because their construction cost estimating is too low or too high. When the amount estimated in not high enough the company can lose a lot of money; when the estimate is too high you lose the job to a competitor and gain a bad reputation. If e
Profit margins are good formulas for general accounting and investment decisions. But as a business owner your determining concern should be your net profit.
Need more convincing?
Let’s look at your average dollar store compared to your average car dealer.
The dollar store is working on a profit margin of up to 300%, while the car dealer is working on a profit margin of as little as 10%. Let’s further assume that the dollar store sells strictly dollar items and the car dealer focuses on $20,000 cars. Using these figures the dollar store will have to sell roughly 4,000 items to earn the same profit as the
We Americans celebrate at least a dozen holidays each year. And while only Christmas seems to bring most business (and other activities) to a halt for at least part of a day, each holiday should represent at least a heartbeat's pause for those of us celebrating to remember who and w
The dollar store is working on a profit margin of up to 300%, while the car dealer is working on a profit margin of as little as 10%. Let’s further assume that the dollar store sells strictly dollar items and the car dealer focuses on $20,000 cars. Using these figures the dollar store will have to sell roughly 4,000 items to earn the same profit as the car dealer does with one sale.
So what’s the important lesson you should learn?
The lesson for retailers, flea market vendors, eBay sellers, and all business people is the following.
Focus on selling more expensive items. You can always use lower end items to attract customers but make your real money with high end products.
You will need allot less sales to make a decent living provided that you sell high end merchandise.
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