10 C
Manchester
Friday, April 4, 2025
BlogUnderstanding and Utilizing Margins for Success as a New Independent Manchester Retailer

Understanding and Utilizing Margins for Success as a New Independent Manchester Retailer

As a new independent retailer in 2024, understanding and effectively managing your product margins is crucial for your business’s success. Many new retailers struggle to grasp the concept of margins, how to calculate them accurately, and what constitutes a good margin. This knowledge gap can prevent your business from scaling from a hobby to a full-time endeavour. Scaling your business can help increase your margin, creating a positive cycle that fuels growth and success.

What is Margin?

Margin represents the difference between your costs and your selling prices, expressed as a percentage. It comes in several forms:

  • Net Profit Margin: The percentage of your business’s revenue that is profit after all expenses.
  • Profit Margin per Product: The percentage of a product’s sales price that is profit after the cost of producing the product.
  • Gross Profit Margin: The average margin across sales of all products, before deducting fixed costs.

Calculating Profit Margin per Product

To calculate the profit margin per product as a percentage, use the following formula:

Profit Margin=(Sales Price−Product CostSales Price)×100Profit Margin=(Sales PriceSales Price−Product Cost​)×100

Most businesses find it easiest to create a formula in Excel or Google Sheets or use a simple margin calculator for this purpose.

Hidden Costs to Consider

Many independent retailers underestimate the necessary margin when starting out. Creoate, a wholesale marketplace for independents, often hears from small businesses about this common oversight. It’s important to factor in all costs to get an accurate picture of each product’s profit margin. Here are a few often-missed expenses:

  • Packaging Costs: Ensure packaging is included in the product cost.
  • VAT Adjustments: Remove VAT from the Recommended Retail Price (RRP) if applicable.
  • Marketplace or Platform Fees: Consider commissions from third-party platforms like Etsy.
  • Direct Labor Costs: Account for the time and cost of making or packing each product.

Improving Your Product’s Profit Margin

Enhancing your product’s profit margin involves various strategies, depending on your production process. Here are some key questions to get you started:

  1. How Can I Reduce Material or Manufacturing Costs?
    • Negotiate better deals by buying in larger quantities.
    • Reduce the number of components or source more from a single supplier to cut shipping costs.
    • Minimize material waste.
  2. How Can I Increase Manufacturing Efficiency?
    • Optimize your working area to speed up the process.
    • Batch similar tasks together to save time.
    • Even small improvements, like organizing your packing station, can save valuable time.
  3. Can I Increase My Prices?
    • Raising your product’s RRP can instantly boost your profit margin.
    • Balance price increases with potential impacts on sales volume.
    • Test small price hikes and monitor the results to find the optimal pricing.

What is a Good Margin?

The general guideline is that a 10% net profit margin is healthy, 20% is very good, and 5% is low. On a per-product basis, a good margin is typically around 50-60%, as this does not account for broader business costs like marketing and rent.

However, if your fixed business costs are low, you can still achieve a healthy profit with a lower margin. For those looking to sell products wholesale, retailers often expect a margin of 30-40% or higher. Therefore, having a strong margin and efficient processes is essential to capitalize on wholesale opportunities and ensure profitability.

Conclusion

For new independent retailers, understanding and managing margins is a fundamental aspect of achieving success. By accurately calculating your margins, factoring in all costs, and continuously seeking ways to improve, you can scale your business and increase your profitability. Using platforms like Creoate can provide valuable insights and support, helping you navigate the complexities of margins and thrive in the competitive retail market.

Latest

Manchester launches vision for new national hub for hydrogen

Manchester is placing itself in prime position to become the home of a new national facility that will be central to the UK’s ambition...

Garden centre run by one family for six decades, up for sale

A garden centre that has been run by the same family for 60 years, is now in need of a new owner. Business property adviser,...

‘Heart of gold’: Darren Orme’s family pay tribute

The family of Darren Orme have paid tribute to him. On March 24, police recovered his body following a search in the Stadium Way area...

New manager appointed for Broadway Baths

Manchester Community Leisure Services (MCLS), the team behind the newly restored  Withington Baths, have been appointed to manage Broadway Baths in New Moston. MCLS was...
Subscribe to our newsletter
Business Manchester will use the information you provide on this form to be in touch with you and to provide updates and marketing.
Don't miss

Kaur Sutherland Champions Wellbeing-Focused Conveyancing Practice

As demands on the conveyancing sector continue to rise, law firms are being challenged to maintain quality, stay profitable, and look after the mental...

Argella Moves Global Base to Dubai, Strengthening Focus on Digital and AI Growth

Technology advisory firm Argella has announced the relocation of its global headquarters from London to Dubai, cementing its commitment to the region as a...

Interactive roadshows set to help people identify bowel cancer symptoms

Two interactive roadshows are taking place in Manchester to help people identify the symptoms of bowel cancer. New research reveals that 35% of adults in...

Woman discovered in River Mersey last year is identified

A woman who was discovered in the River Mersey last year has been identified following an extensive police investigation. She can now be named as...

More News

Manchester launches vision for new national hub for hydrogen

Manchester is placing itself in prime position to become the home of a new national facility that will be central to the UK’s ambition...

Work starts on a permanent home for Star Radcliffe Academy

Work has begun on creating a permanent home for Star Radcliffe Academy. The secondary school is the first in Radcliffe for over a decade, offering...

Cadillac to join Formula 1 grid as 11th team in 2026

General Motors (GM) has officially gained approval to join Formula 1 in 2026, marking a significant milestone for the US automotive giant. The team will...