What's a reasonable profit margin?

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What's a reasonable profit margin?
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hedgewitch

Joined: 26 Nov 2005
Posts: 5834
Location: Daft wench GHQ

Posted: Wed Mar 28, 07 9:36 am Post subject:

tahir wrote:

f*** me ï¿½27 for a lemon cake:

https://www.allthingsgreen.net/marketplace/organic-cake-company-m-27.html

Tahir, drop the day job and get baking!

OtleyLad

Joined: 13 Jan 2007
Posts: 2737
Location: Otley, West Yorkshire

Posted: Mon Apr 02, 07 1:52 pm Post subject:

Pricing and profit and advertising.

When it comes to pricing I think you need to look at similar products and see what the difference is in yours - is there something unique about what is does, its style, how it combines functions? If so this can be a good reason for expecting people to pay more.

I have found that by setting a price on the high side you can always offer discounts - people do like to think they are getting a bargain.

You MUST make a profit - if you don't you won't be here next year!
Profit is not turnover! If you need to contribute ï¿½10,000 to your household a year then on a 20% nett profit margin you have to sell at least ï¿½50,000. This is ignoring such nasties as NI contributions, tax, etc.

I learned the hardway that advertising in magazines is way too expensive - after taking out half page ads in over 10 different (national) mags I NEVER got back the cost of the advert (ï¿½500 in some cases) in sales generated.

In my experience the best sales come via forums/reviews/recomendations on other peoples websites, etc. So if you have a site for your own products, try to get reviews on other peoples sites or forums where you thing people might be interested in your products. When I tried doing it this way, I was amazed at the results - and it does not cost a penny!

Shows cans be deceiving too - if it takes you several days/weeks to prepare, you might incur travelling/accomodation costs/paying for the stall, extra food and drink etc. You could be busy for a few hours but when you add it all up at the end of it all you come back with ï¿½0 or less!

MarkS

Joined: 01 Aug 2006
Posts: 2626

Posted: Mon Apr 02, 07 2:16 pm Post subject:

tahir wrote:

f*** me ï¿½27 for a lemon cake:

And not even iced!

Does include delivery though.

tahir

Joined: 28 Oct 2004
Posts: 45674
Location: Essex

Posted: Mon Apr 02, 07 2:23 pm Post subject:

MarkS wrote:

Does include delivery though.

But it doesn't even look nice

MarkS

Joined: 01 Aug 2006
Posts: 2626

Posted: Mon Apr 02, 07 2:34 pm Post subject:

I think that a big issue in many craft/consultancy type things is the cheaper labour available overseas. Look at all the indian/chinese/polish etc stuff around. It can be bought in cheaply so traders can turn a good profit on it. When looking at your own work the cost base is so much higher.

ï¿½15K over say 230 working days is about ï¿½65/day profit needed. This is what has always frightened me off retail stuff - anything with overheads is even worse.

Deff target high priced stuff. Homes & Gardens etc.

MarkS

Joined: 01 Aug 2006
Posts: 2626

Posted: Mon Apr 02, 07 2:37 pm Post subject:

tahir wrote:

MarkS wrote:

Does include delivery though.

But it doesn't even look nice

No. And it isnt as if it's exactly expensive to make a sponge cake. Even using organic ingredients.

Spelt flour would up the cost significantly but even then I cant see justification.

Stacey

Joined: 18 Jul 2005
Posts: 8380
Location: Kernow

Posted: Wed Apr 04, 07 9:06 am Post subject:

OtleyLad wrote:

I
You MUST make a profit - if you don't you won't be here next year!
Profit is not turnover! If you need to contribute ï¿½10,000 to your household a year then on a 20% nett profit margin you have to sell at least ï¿½50,000. This is ignoring such nasties as NI contributions, tax, etc.

See, this is what I don't understand. When I was working for someone else and being paid ï¿½12 an hour I didn't have to make 50k to take home 10. We did an excercise at college that showed that we had to make 25k to take home 10 (based on one of the students' costs) and it just totally ignored the ï¿½8 an hour, like it didn't exist. ï¿½8 an hour is ï¿½8 an hour whether you're earning it by being self employed or being paid by someone else surely? I know plenty of artists/designer makers who are making an ok living and keeping their heads above water and I know for a fact they're not earning anywhere near 50k. I know it's tough being self employed but I also know plenty of people who are doing it and coping. We seem to feel a need to be full of doom and gloom before someone has even got off the ground in this country. I'm all for being realistic but I think we all too often cross a line and just give nightmare scenarios instead.

sally_in_wales
Downsizer Moderator

Joined: 06 Mar 2005
Posts: 20809
Location: sunny wales

Posted: Wed Apr 04, 07 11:40 am Post subject:

I understand what you are saying completely Stacey, I think possibly where a lot of people like us go wrong, is we invest most of our take in the next project rather than remembering to pay ourselves first. Thats when that profit margin becomes critical, without it, you sell a mug cosy and you can afford to buy the materials for the next one, but that is all. If you want to develop a new range, the money either has to come out of the profit margin on existing lines or it will dip into your wages. I'm only just getting my head round this concept.

Stacey

Joined: 18 Jul 2005
Posts: 8380
Location: Kernow

Posted: Wed Apr 04, 07 12:27 pm Post subject:
That makes more sense to me

toggle

Joined: 30 Dec 2006
Posts: 11622
Location: truro

Posted: Wed Apr 04, 07 6:33 pm Post subject:

Stacey wrote:

I'm never too keen on the idea of co-ops just because of the nature of them and me. This may come as a surprise to all of you but I don't do people very well

whose party did I go to then?

or does it take that much cava before you 'do' people?

Stacey

Joined: 18 Jul 2005
Posts: 8380
Location: Kernow

Posted: Wed Apr 04, 07 6:46 pm Post subject:
Oh god, what was I 'doing' ?

toggle

Joined: 30 Dec 2006
Posts: 11622
Location: truro

Posted: Wed Apr 04, 07 6:51 pm Post subject:
being a people person. telling everyone stories about stuff and trying to make me do small talk with several different people. I do NOT do small talk

Stacey

Joined: 18 Jul 2005
Posts: 8380
Location: Kernow

Posted: Wed Apr 04, 07 6:54 pm Post subject:
Oh, is that 'doing people'? I always thought that was called showing off If you don't like small talk you shoulda tried some BIG talk

toggle

Joined: 30 Dec 2006
Posts: 11622
Location: truro

Posted: Wed Apr 04, 07 6:56 pm Post subject:
you did enough of that for everyone

Stacey

Joined: 18 Jul 2005
Posts: 8380
Location: Kernow

Posted: Sat Apr 07, 07 7:50 am Post subject:
Having reviewed my pricing strategy with the tutor of the marketing course I'm going to have to change all my prices - some of them to nearly double what they are now. I guess it's a good time to do it as I don't get that many hits on the website but what if it pee's people off?

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