How do you figure out a profit margin?

tojealcatojealca Posts: 5subscriber
I need youor help!
In the product sales business that I run I get paid by the owner a % of the Profit that I create.  I am setting up a spreadsheet to track this so that I can be paid the right amount for the work that I do. 
Here is the problem, when I put all the informantion in quick books, the number looks sad to be sure, but when I put the same information in to Excel, I get a completely different number!?!?! 
My question is, if I pay say $5.80 for an item and I sell it for $14.50, what is my profit margin?  And is that different some how than my mark up. 
In my spreadsheet, I am using the formula (Selling Price-Purchase Price)/Selling Price, is this right?
Please help thank you!

Comments

  • keyconkeycon Posts: 34subscriber
    Tony,
    You definitely need to understand this part of business. I don`t know many people who just work for fun.
    There are plenty of Mark-Up calculator programs out there on the web - just Goggle it.  Click here to review one.
    On your example, your product "mark up" is 150% with a 60% "gross margin" or $8.70.
    When you start talking "profit margin", are you talking "gross" or "net"?
    Sounds like the owner is paying off "gross margin percent" as many sales organizations do. So, if he is paying you 10% of gross profit, on this item, you would make $.87; 20% = $1.74; etc.
    Hope this helps.
    [email protected]
  • tojealcatojealca Posts: 5subscriber
    Thank you for the answer, I will try one of the calculators.
    What I dont get I guess is the difference between Profit Maragin and Mark up?  Why would they not be the same?  If I mark up a product 50% would then not my profit margin be 50%?  But it is not it is 33.33% is that because my profit is a third of the total cost of the iterm?
    I guess as long as I know how much in $$$ I have for profit my commission will be right, I don`t want to cheat the owner, but I have to be able to explain why the number is so different.
    Thanks for the help!
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