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Old 13th October 2007, 12:46 PM   #1

Join Date: Oct 2007
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Default First Time As A Middle Man - Pricing Questions

i have had my own biz for 20 yrs and for the first time find myself in the position of acting as the middle man for a client.
i am a bookbinder and a 1 person operation. the client knows the books are to be outsourced, and that i will stand behind the work.
my delimma is that i am not sure how to mark up the cost.
the work will be done 1,500 miles away from me so there is shipping as well as perhaps a trip to the site. quantities are not big but considered speciality work. 500 and 1,000 pieces. any ideas would be greatly appreciated.
this is my first time on this site. so glad to meet you all.
marie p.

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Old 14th October 2007, 06:52 AM   #2
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Location: New Port Richey, FL
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How to mark up huh?

How much do you want to make?

If you want to make 10% divide the net by 90%.
If you want to make 20%, divide the net by 80%.
If you want to make 30%, divide the net by 70%.

Here's a for example.

Your net (cost) is $.75 per book to bind the books.
Take $.75 and divide by .70 (70%) and you get a 30% profit margin of $1.0714285 rounded up to $1.08.

Some people multiply the net (cost) by 30% thinking it's a 30% PROFIT MARGIN when it's a 30% mark up of the cost. That calculation would look like this. $.75 times 130% = $.975 rounded up to $.98.

For years I used the WRONG calculation (second example above) and couldn't understand why my profits didn't register 30%. Somebody informed me that your profit margin is always based on your sales, your selling price. Profits are not based on your COST. I've been ok since then.

If you are a casual reader of this post and in a business where you want to make 30, 40, 50 percent profit margins, just reading this and applying it will allow you to make more money immediately and forever. It has for me!!!

Hope this helps!!!!


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Old 14th October 2007, 08:04 AM   #3
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Yep. I lost a deal with a major importer because they told me they needed a 50% markup. I did my calculations and I could handle their 50% markup. Of course he ended up meaning "margin". It never ceases to amaze me how business people at all levels do not understand the difference. To get a 50% profit margin, you need a 100% markup. Those are very different numbers.

Ken Fenner
Roof Cleaners PA
Roof Cleaning Service for the Philadelphia Suburbs
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Old 14th October 2007, 11:56 AM   #4

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Location: Colorado
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How much do you want to make?
That is always the starting point I use, and a good question to emphasize. Outside of profits and margins, consider what you will be satisfied with for the work/expenses involved.

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Old 15th October 2007, 08:56 AM   #5

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thanks folks,
seems pretty elementary when you put it that way.

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