Markup pricing, once in a while called cost-plus pricing, is the process businesses use to add a particular percentage of the cost to the price of their product to make a profit.
However similar, markup percentages and profit margins are not something same. Both are often communicated in percentages; however, your overall profit margin is the income your business earns after deducting all business costs. Markup considers profit as a piece of the cost of goods sold (COGS) instead of revenue. At the point when you mark a product or service up, it has a domino effect on sales revenue and, eventually, your overall margin.
Why Is It Important to Understand Markup Percentages?
Most businesses depend on markup percentages to decide the best price to set for each product, particularly assuming if the business is new. Over-charging and under-charging can obliterate sales, and utilizing a reliable formula can assist you with tracking down best percentage for your market.
Understanding markup percentages likewise allows you to involve that figure as a baseline when tracking goal progress. While a markup percentage alone can’t tell you much about your actual net profits, they truly do give you a quick and easy way to ensure gross profit margins stay consistent and give you a place to start experimenting with should those numbers suddenly drop
Knowing your markup and comparing it to other factors, similar to item production expenses, can allow you raise markup as needed to increase profits or take advantage of lower marginal costs.
GOIS Inventory Management Software Can Help You Manage Markup Percentages
Inventory management software from Goods Order Inventory offers a simple method for improving on inventory management, regardless of whether your business has multiple sales channels. Our Completely scalable inventory management platform even incorporates a markup feature that lets you apply a standard markup percentage to your products and adjust it according to client segment. As your cost of goods sold (COGS) fluctuates, your sales price will use that markup percentage to automatically adjust your sales price along with it.
Request a demo today to see for yourself how GOIS Inventory’s easy-to-use, efficient inventory management software can make things easier for your business.
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