To calculate the profit margin, you must first know all the costs associated with the product or service that your business offers. Then, you will have to add the costs that you identify as directly or indirectly associated with the production and delivery of your product or service.
The next step is to calculate the gross profit or gross profit per product. We already saw how to do this in the previous section. The difference is that now it is also important to calculate the gross profit for a month . To do this, you need to consider how much you earn from what you sell during a month and what your costs were during the month.
These numbers must be subtracted. That is, subtract the expenses from the income from your products . That would be the gross profit for the month. Then, to get the percentage, you will have to cambodia phone data divide that number you obtained by the income from your monthly sales and multiply the result by one hundred. This is how you arrive at the monthly gross profit percentage.
With this last piece of information, you will be able to obtain the net profit. But first, it is advisable to make a list of the fixed and variable costs :
Fixed expenses are those that are paid monthly to keep your business running (for example, rent, electricity, gas, water, etc.).
Variables are those that change from month to month (for example, a loan, a machinery repair, etc.).
Now it's time to calculate the net profit for the month. You'll get to it like this: gross profit – ratio between expenses. To get the percentage, look at this calculation:
[(gross profit – ratio of expenses) / income from sales of your products] x 100.
When calculating your profit margin, it is key that you consider:
Payments to your employees and the seasonality of inputs can alter the values you estimate for production costs. Therefore, it is best to average expenses for a period when calculating your profit margin.
The sales cycle of your product. To arrive at a final sales price, consider every part of your product, from advertising to after-sales services.
Exploring what return you will get from each investment you make is as important as knowing your profit margin.