Win Rate - The Personal MBA (2024)

Margin of profit(often abbreviated to 'margin') is a measure of how much you keep from the revenue you make from a sale. Companies often use itMargin of profitas a way to compare offers.

Josh Kaufman explains 'profit margin'

Margin of profit(often abbreviated to 'margin') is the difference between how much revenue you bring in and how much you spend to bring it in, expressed as a percentage. Here's the formula for itMargin of profit:

((Turnover - Costs) / Turnover) * 100 = %Margin of profit

If you spend $1 to get $2, that's 50 percentMargin of profit. If you can make oneProductfor $100 and sell it for $150, which is aGainof $50 and aMargin of profitof 33 percent. If you can sell the same product for $300, that's a 66 percent margin. The higher the price and the lower the costs, the higherMargin of profit.

At least yoursMargin of profitcan never exceed 100 percent, which only happens if you can sell something that costs you nothing.

Margin of profitis not the same aslabelling, which indicates how the price of an offer compares to the total cost. Here is the formula for formatting:

((Price - Price) / Price) * 100 = % markup

If the price of an offer is $1 and you sell it for $2, your markup is 100%, but yourMargin of profitamounts to only 50%. Margins can never exceed 100 percent, but markups can be 200 percent, 500 percent, or 10,000 percent, depending on the price and total cost of the offering. The higher your price and the lower your costs, the higher the price.

Most companies try to keep every offerMargin of profitas high as possible, which makes sense: the higher the margin, the more money the company can keep from each sale. Either way, there are a lot of market pressures that can lead to a decline in margins over time: aggressive pricing from competitors, new offerings that reduce demand for older offerings, and rising input costs.

Companies often use itMargin of profitas a way to compare offers. If a company has more than one offering in the market, they will favor the offerings with the highest margins. When a company needs to reduce costs, it often starts by eliminating offerings with the lowest margins.

When researching a company, pay close attentionMargin of profit. The higher the margin, the stronger the company.

Questions about 'Profit margin'

• What is the profit margin of your offer?
• What is the markup of your offer?

“I never lost money making money.”

Bernard Baruch, financier and philanthropist

https://personalmba.com/profit-margin/