How to calculate margins

[Lynne Baker]

You know when you buy something a product for £10, and you sell it for £25?
That £15 on top is known as the margin.
It can be quite a pain in the arse to work it all out, I can tell you! So, Alex and I have created a spreadsheet to do the hard work.

What it shows is the following:

The name and description of the product or treatment.
The price you buy it for (or in the case of treatments you use the cost of the treatment)
The next column shows the sale price. We've given you a couple of examples to demonstrate how this works.
Column F will show you the % margin.
Column H is where you can enter whatever % margin you want to apply up to 99%
Column I will show you what that does to the sales price.
Column K is where you can enter a particular % margin up to 99% and then Column L will show you the new sales price but rounded up to the nearest 50p.

Phew!

Column N and O are really nifty, even if I do say so myself!
Enter whatever sales price you fancy in Column N and Column O will show you the % margin!

Why is this important?

If you buy a product for £10 ex VAT, you're actually paying £12 for it. Unless you're VAT registered you won't get that VAT back from the Revenue.
If you sell that product to your client for £13 you're making only 8% margin. It's not enough, unless you're selling hundreds of them every day!

Use this sheet to see how much margin you're making, and see what happens to the margin when you enter a hypothetical new price.

This will be in the dropbox folder as usual.
Please don't delete or modify any of the documents therein, and don't save your own version of this or any other document into it, otherwise we'll all be able to see it!

If you want access drop me a pm, or just download the document straight from here. You'll need a spreadsheet software to use it.

Enjoy!

https://www.dropbox.com/s/cfqku2sihen9x2d/Margin calculator.xlsx

 

[x Fee x]

Thanks for sharing Lynne, very helpful as always x

 

[tjmadmum]

What a lovely thing to do Lynne, when I get a chance to go on my computer I am definitely downloading that! 😉 Just a quick question I can just save a copy to my comp I presume? Thanks for sharing xx

 

[rachael204]

thank you Lynne

 

[dandelionpoppy]

Lynne really is one of the most helpful people on this site. She generously gives sound, experienced, practical advice.

 

[Lynne Baker]

Gosh, thank you!
That means such a lot to me.

 

[SillyBilly]

Lynne. You are a true diamond. Thank you.

 

[Lynne Baker]

If you need access to the dropbox folder please pm me your email address. Don't put it on the open forum where it can be read by all manner of spam bots and the like!

 

[Emilyx]

thanks for this its great! how do i use it for myself do i just copy it all out into a new spreadsheet? sorry if its a stupid question x

 

[Lynne Baker]

Just download it from the link above and off you go!
No need to copy any of it, just use it as is.

 

[Emilyx]

Just download it from the link above and off you go!
No need to copy any of it, just use it as is.

oh ok thank you

 

[Chrysalis]

Thank you Lynne much appreciated. What would you suggest would be acceptable % profit if 8 is too little? Is there a "perfect" business percentage so to speak?

 

[Lynne Baker]

Ah, well that's quite a personal thing.
Some products will already have an RRP, and some treatments will have an acceptable price range. For instance if you tried to sell VINYLUX at £20 you'd make a bigger margin, but you'd not keep your clients for very long when they discover that the RRP is 9.95!

8% could vey well be an acceptable margin if you were selling packets of crisps at a football match. Many thousands of people all buying crisps would make that 8% equate to a lot of gross profit.

You also have to take into consideration the effort involved in getting your profit.
You might make a decent profit off the back of 20 half leg waxes a day, but you'd be knackered!
If you look at the profit associated with a half leg wax as compared to say, a facial, you might decide that you'd rather do 3 facials a day than 20 waxes. You also have a better chance of retailing product to a facial client than to a wax one.
This will then shape your marketing campaigns as well. I don't do any marketing for waxing but I do LOTS for the more profitable treatments. The waxing is a standard treatment in a salon and I use that appointment to promote my other treatments.

This spreadsheet along with all the others I've created is just one piece of the business jigsaw.

 

[elainel]

Fantastic spreadsheet. Thank you.

 

[Claireybearyowen]

What a soooooper thing to share how very unselfish of you , thank you thank you xxx

 

[tinksandfloris]

Lynne,

Amazing as usual!!!!

 

[chesney]

Thank Lynn

 

[2h2h]

Thanks Lynne x

 

[Jennica28]

Brilliant & so helpful. Thank you so much Lynne. x

Sent from my rk30sdk using SalonGeek

 

[mac72]

Lynne, this is great advice and I'm sure a lot of us don't spend the time to work out our actual margins. We could probably be doing a lot better financially if we did. When selling products what kind of profit percentage should we be aiming for?? I realise this probably depends on what range you go for but what a good ballpark figure? Thanks again