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Q: A general Marketing and Markup Question for Serenata ( Answered 4 out of 5 stars,   0 Comments )
Subject: A general Marketing and Markup Question for Serenata
Category: Business and Money > Small Businesses
Asked by: pcwi_ceo-ga
List Price: $25.00
Posted: 06 Jan 2004 07:52 PST
Expires: 05 Feb 2004 07:52 PST
Question ID: 293652
Since your last response, I've entertained the idea of hiring a sales
person.  My profit margin has never been really established and may
not be able to support the added weight of "Giving Away" a percentage
of my product to a sales person.  Here are your research tasks:

I. How do I design a profit margin/markup that will make me a profit
and not price me out of the game?
II.  What factors go into designing a competetive markup percentage
IE: General Expenses, Shipping, Item Cost and overall overhead.
III. (Greedy Question) My supplier is obviously buying in quanity,
repackaging and then reselling them to me (at the profit). My question
is , how do I find data either hints from the supplier or from the
product and/or web to locate "HIS" source?

Clarification of Question by pcwi_ceo-ga on 06 Jan 2004 07:53 PST
Oh, this is for the product line.

Request for Question Clarification by serenata-ga on 12 Jan 2004 19:20 PST
Hi Joe ~

The questions you are asking about profit margin do take into
consideration unit pricing, and the various costs connected with
receiving, warehousing, shipping, etc. Depending on how well your own
cost accounting goes, your true unit costs versus profit margins can
(and really should) take into consideration staff time for all of the
steps to include the items in your inventory as well.

Lastly, as you so clearly pointed out, it has to keep your profit
margin and ultimate pricing in order to keep prices within the range
the market will allow.

I can give you some links to formulas used and/or taught in basic
courses for business administration if you'd like. But it would be
very difficult for me to sit down and work up a formula that is
workable to meet your specific needs.

As for finding the your supplier's source, I did spend some time
looking at various Chinese manufactories in China, where I suspect
your products are produced, but was not able to come up with a firm in
Taiwan, HongKong or China that matched your product line.

There are other, smaller manufactories in Central America and Mexico,
where they may be made, but I drew a blank looking there as well.

I can give you links to formulas for determining unit pricing and
what/where/how  to come up with a markup cost which would cover a
salesperson's commission, and you might want to look at what point in
number of units per order your profit margin increases.

If you feel this would be a sufficient answer, please let me know.

Warm regards,

Clarification of Question by pcwi_ceo-ga on 12 Jan 2004 20:10 PST
Okay, I am floored by my own stupidity and weak mind for business. I
was thinking there was a percentage that would be an average of a
certain industry. For example, I buy blank clothing for printing, I
already know I am paying (on the average 300 to 500% markup.  So I
guess with the knowledge I was thinking  that in the vast crevasses of
cyber world there would be a published chart of general markup based
on industry.

With regards to my product line, yes it is ?Made in China? and I too
have chased many rabbits down the hole only to come up with a nose
full of earth.  I may still fish in my suppliers pool for a lead.

As far as this question goes if you feel I?ve given anymore value
leads please follow else post what you think I may gain from and put
this (newly enlightened ridiculous) question to bed.

With my tail between my legs

Request for Question Clarification by serenata-ga on 12 Jan 2004 21:10 PST
Okay, Joe ... bear with me.

What you ask isn't ridiculous at all. There is a general profit
picture which should in reality be around *** this is a very rough
ballpark figure *** 29% AFTER you have really accounted for your
"true" unit cost.

So I am glad that you went in and told me, too, where you were coming
from. Some cost accounting gets down to the very nitty gritty to
square footage of warehouse space costs 'x' in which you can store 'x'
units, etc.

Shipping costs, picking off the shelves, etc., the cost is for the
first unit, and decreases for each additional unit, til you have to
pull out another box to send, etc., because of incrementals, etc.

I was very cognizant of that when I was trying to give you a good answer. 

As an example, there's usually about a 100-200% markup on fine
jewelry, but that so-called 'markup' only takes into consider the cost
of the gold at the time it was bought, the cost of the gems. That
markup usually doesn't take into consideration the artisan's time to
design or make the piece, the cost of insuring that piece, etc., which
wildly changes that profit margin from 100-200% to considerably less.

I was approaching your question from the point of all overhead
considerations (because where I attended University, they beat it into
our heads that we had to understand the true costs involved).

All those hidden costs increase the real 'cost' to the retailer of the
item; and has to be accounted for in pricing in order to pay all those
bills connected with selling it.

Hence my original Request for Clarification - there are lots of
formulas which more or less get you about the same figure.

To simplify, try this, and I'll see if I can find you a formula along
the same way. Can you add a percentage, say 20% to 30% of the sales
price as a commission for your sales person, or a graduated percentage
for a larger order, greater percentage, and stay within your pricing

Let me see what I can find to work along those lines if the above made
any sense to you. If that's what you're looking for, let me know, and
I'll see what I can find.


Clarification of Question by pcwi_ceo-ga on 13 Jan 2004 04:17 PST
Bingo, Serenata.... 29% is the kind of number I was looking for.  I
basically am thinking on these lines, if I sound off key you have my
permission to laugh.  My ?fixed? monthly expenses to run my business
is $500.00 (figures are not true just for demo purpose) and my
"variable" expenses average out to be $750.00 per month. Total
expenses is $1,250.00 per month. My average cost per unit is $15.00
including inbound freight.  Now I sell on the average of 150 units per
month so that make my unit cost (including expenses) $23.33 per unit. 
Now I my sell these for $29.00 which gives me $5.67 @ 24.xxxxx percent
profit.  This is my thinking however off it may be. Do you think we
nailed down the desired answer?

Request for Question Clarification by serenata-ga on 13 Jan 2004 04:59 PST
It looks to me like we've got it now!

And you'd find those explanations and formulas not only dry and boring
to work through, but at times it gets puzzling!

Here is my opinion on your pricing. And I recall from your previous
question that you were worried about over-pricing. Yet, your online
prices for direct B2C (Business to Customer) sales are well within the
comparable retail prices and in come cases, several dollars below. In
other words, you've got some room to 'play', which could include the
sales commission and still come out ahead.

If you want to do it the "easy" way, add your planned commission (and
remember I was going high end commission - many companies will pay 8%
to 12% commission), and see how that adjustment works with your
current pricing or if adding another dollar or so will be necessary to
do so.

I still have not been able to locate a manufacturing source (at least
not online) to eliminate the middleman. The reason I am looking online
is for an idea of capabilities and graphics (if there are any).

What do you need now for a satisfactory answer?


Clarification of Question by pcwi_ceo-ga on 13 Jan 2004 06:43 PST
How about you logging in and closing this question so you can get paid.
Subject: Re: A general Marketing and Markup Question for Serenata
Answered By: serenata-ga on 13 Jan 2004 12:10 PST
Rated:4 out of 5 stars
Hi Joe -
  [who is *definitely* not braindead ;)  ~

What started out confusing for me, because I wasn't sure what you were
looking for, turned out to be an interesting and enjoyable exchange of
clarifications with insight for both of us (well I hope so, anyway).

As I stated, your current prices are comparable to similar products in
some of the mall stores. In many cases, your prices are better - and
you include shipping costs, so there is better value ordering from
you. This gives you the advantage of having some 'wiggle room' you may
need to pay commissions should you hire a sales rep.

In researching the answer, I did find some resources which may be of
help to you, which I'll link here.

1. A free Gross Profit Margin Calculator on the site:

2. A different Margin Calculator from KJE Solutions (this one is in

3. Article, "Gross Profit Margin And Markup" from

4. Net Profit Margin (the "formula") from biz/ed:
   Basically: Net Profit = Gross Profit - Expenses

As for the product's manufacturer, you know it will be one of those
things that I sort of stumble across ... and count on my passing the
information along when (not if) I do discover who it is.

Search terms used

  - cost
  - profit margin
  - cost + profit margin

Thank you for asking for me and for your patience as I worked to
figure out the information you were looking for. At least it was more
interesting *your* way than the dry discourse I might have given in
trying to give you a good answer!

Warm regards,
pcwi_ceo-ga rated this answer:4 out of 5 stars and gave an additional tip of: $15.00
As always with Serenata the responses are timely and very informative.
This person is an asset to Google and would command a well deserved
salary in the open market.  For the pennies spent I’ve received
valuable insight and knowledge, not to mention the links to resources.
 Once again Serenata thank you for a job well done. Please don’t ever
leave this forum.


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