Pricing Your Product or Service

5. Margins

5.1 Margins indicate the percentage profit a business makes after applying a mark-up.

• For example, if a business buys a product for £10 and marks it up by 50 per cent, thus selling it for £15, the margin is 33 per cent (the value of the mark-up, divided by the selling price x 100).

5.2 Margins are good barometers of how important particular products or services are to the profitability of your business.

• The higher the margin, the more lucrative it could be.
• Low-margin, low-volume products should not occupy large chunks of your time or storage space at the expense of higher-margin products.