What's a reasonable profit margin?

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What's a reasonable profit margin?
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Downsizer Forum Index -> Small Business Questions, Ideas and Advice

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Jonnyboy

Joined: 29 Oct 2004
Posts: 23956
Location: under some rain.

Posted: Sun Mar 25, 07 6:54 pm Post subject:

nickhowe wrote:

Price elasticity is actually sound theory.

Indeed, It's the reason why the government taxes fags, booze and fuel. They know that demand will not change significantly despite increases in price. That means guaranteed income.

Pricing your goods at a rate which the market can accept is a serious proposition, jema makes a very valid point here.

There is no 'reasonable' profit margin I'm afraid.

dpack

Joined: 02 Jul 2005
Posts: 45738
Location: yes

Posted: Sun Mar 25, 07 6:55 pm Post subject:
i only just noticed . wow oooooh wooooooo whooooooooooooooo

MarkS

Joined: 01 Aug 2006
Posts: 2626

Posted: Sun Mar 25, 07 7:20 pm Post subject:

Congratulations.
(I always assumed you were far too young to be a grandmother.)

All the points about pricing are good. It varies between industries and with volumes / rarity. commodity stuff = low margin, specialist stuff = high price/margin.

I think that the key thing is not the % margin as such, although that may be useful, but actually knowing that you are making money,

When my brother first set up as a mobile mechanic his record keeping was terrible. When I did his accounts at the end of the first year I found that in some cases he had been working almost for free. He was so keen to get work that he had massively underpriced his time. In reality he could have done less work and made far more.

But it also comes down to market, different market sectors for the same product will have very different attitudes to prices. With lick you should be able to hit the trendy/arty market - who will almost certainly pay more than those tight/stingy downsizery bods.

Marionb

Joined: 27 Aug 2006
Posts: 5267
Location: Mid-Wales

Posted: Sun Mar 25, 07 7:44 pm Post subject:
Congratulations Stacey!! Will it be your first grandchild then??

Blacksmith

Joined: 25 Jan 2005
Posts: 5025
Location: Berkshire

Posted: Mon Mar 26, 07 7:59 am Post subject:
Congratulations Stacey !...... Get knitting !

hedgewitch

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

Posted: Mon Mar 26, 07 8:35 am Post subject:
Brilliant news, Stacey How many bootees have you made, then? And, when are you going to be a grannie?

tahir

Joined: 28 Oct 2004
Posts: 45482
Location: Essex

Posted: Mon Mar 26, 07 10:55 am Post subject:
Hey congratulations you old goat, when are you having the horns grafted on?

sean
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 42208
Location: North Devon

Posted: Mon Mar 26, 07 11:29 am Post subject:
Congratulations. You'll be needing to bump your margin up a bit then if you've got a grandchild to support/spoil.

Andy B

Joined: 12 Jan 2005
Posts: 3920
Location: Brum

Posted: Mon Mar 26, 07 11:43 am Post subject:
Work out all of your costs, including VAT and then Double it. does that give you a number that realisticly people would pay for your product?

Stacey

Joined: 18 Jul 2005
Posts: 8380
Location: Kernow

Posted: Mon Mar 26, 07 6:10 pm Post subject:

Andy B wrote:

Work out all of your costs, including VAT and then Double it. does that give you a number that realisticly people would pay for your product?

I can't find people doing what I'm doing

My main selling times are at fairs and shows and I need to get the pricing sorted before then (first one at Wonderwool so not long now) I'm just going to have to jump in and try it aren't I?

Stacey

Joined: 18 Jul 2005
Posts: 8380
Location: Kernow

Posted: Mon Mar 26, 07 6:11 pm Post subject:
The baby's due in October - really nice time for making cosy cuddlies I'm 41 so just about old enough to be a granny.

Cathryn

Joined: 16 Jul 2005
Posts: 19856
Location: Ceredigion

Posted: Mon Mar 26, 07 6:46 pm Post subject:
Congratulations Stacey!

sally_in_wales
Downsizer Moderator

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

Posted: Tue Mar 27, 07 2:25 pm Post subject:

More thinking on the profit margin thing, mostly because I've been trying to work the same thing out logically myself today. Is it silly to do the calculations based on material and premises costs + labour at the minumum wage + a bit, my thinking so far is that as long as I make more than I would flipping burgers I'm spending my time ok, and of course the '+ a bit' is quite high on some things whilst it isn't on others. The end result should hopefully be a realistic earning per hour, but I don't want to automatically chalk myself up for a wage scale that might price my stuff out of the market.

Stacey

Joined: 18 Jul 2005
Posts: 8380
Location: Kernow

Posted: Tue Mar 27, 07 2:30 pm Post subject:

sally_in_wales wrote:

The way we were told to work out our costs was almost exactly that - he didn't stipulate what was a reasonable margin though. I wouldn't want to work for minimum wage as I was on £12.50 an hour at work. Personally I don't think craftworkers/artisans should work for the minimum wage due to the skill involved in what we do. However, like you say you don't want to price yourself out of the market. The thing is that craftworkers/artisans charging unrealistically low prices sets the bar for what the market will accept IMO. We owe it to each other to try to find a reasonable scale. At the moment I'm trying out pricing things at £8 an hour. I still haven't worked out what to put on top yet but I'm trying

hedgewitch

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

Posted: Tue Mar 27, 07 2:41 pm Post subject:
Are you looking at costs of equipment too? Anything you need and might have to have repaired or replace in time. It's something you need to consider if you couldn't work without something - maybe Sally's sock knitting machine? Not sure if needles count, though

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