Pricing & Profitability – The Magic Pill ©

By Greg Niemi . August 6, 2013

We now pick up in chapter 5 where Bill is about to learn some valuable lessons about pricing and profitability from his brother Bob. The Village Bait Shop

Bill has the big education and the big job in the big city.  Whereas, brother Bob owns “just a” bait shop in their hometown yet appears to be making a pretty decent living.  Can that be? 

After years Bill finally asks brother Bob to share his secret for success.  Bob, pleasantly surprised by his brothers’ question says: 

“It’s really quite simple.  I buy a dozen minnows for a buck and sell ‘em for three bucks – you’d be surprised what that 2% will get you”. 

It’s clear that brother Bob doesn’t know, or at least pretends not to know, the precise margin of profit he makes from his simple mark-up.  Do you? 

Bill being good with numbers can see that Bob’s mark-up on the direct cost of the minnows was actually ____ % and the gross profit margin was _____%.   

Although Bob may not, or pretends to not, know his precise mark-up and margin, he does know he needs to mark-up his direct costs by a handsome margin in order to make a decent profit and living.  

It is imperative to understand all costs, direct and indirect, plus know how to mark-up those costs by a good margin in order to make a decent profit margin.Markup vs. Margin Chart 

The percentage of mark-up must always be greater than the desired resulting margin (e.g., 10% markup does not equal 10% margin, 20% markup does not equal 20% margin).  

The Magic Pill © provides easy to follow illustrations, samples, charts and tables on pricing including the difference between mark-up and margin and profitability. 

But wait there is even more … a few chapters later Bill meets Tom and learns why successful business people know all their stats inside and out with particular attention on the two most vital stats of all.  

I invite you to post any comments regarding the above including your calculation of the mark-up and margin.  Please email greg@niemitrust.com for information on how you can obtain your very own autographed copy of The Magic Pill ©. 

Greg 

© 2013 NIEMI TRUST, LLC – All rights reserved.

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