Not quite DIY:
Not having used mark up and margin for years I am now confused as to
what my profit is in % terms.
example:
cost price £1.89
sell price £2.89
Profit is £1.00

But should I log this as 53% profit based on cost price
OR 34% profit based on selling price.

At the moment I am thinking it should be 53% based on cost.

On 02/04/2016 21:17, ss wrote:
Not quite DIY:
Not having used mark up and margin for years I am now confused as to
what my profit is in % terms.
example:
cost price £1.89
sell price £2.89
Profit is £1.00

But should I log this as 53% profit based on cost price
OR 34% profit based on selling price.

At the moment I am thinking it should be 53% based on cost.

Let's make it easier;
Cost £2
Selling £3
Profit £1

That's a 50% mark up on cost giving you a 33% profit on sales.

OK if you're selling 10,000, rubbish if you are selling 5.
Turnover is vanity, profit is sanity.



--
Dave - The Medway Handyman

On 02/04/2016 21:31, David Lang wrote:


Let's make it easier;
Cost £2
Selling £3
Profit £1

That's a 50% mark up on cost giving you a 33% profit on sales.

OK if you're selling 10,000, rubbish if you are selling 5.
Turnover is vanity, profit is sanity.

Surely that's ONLY the mark-up on the item. 20% VAT, operating expenses,
postage sending the item, credit card costs, wages etc. may make the £3
selling price a loss and not a profit.


--
mailto: news {at} admac {dot] myzen {dot} co {dot} uk

On 02/04/2016 21:47, alan_m wrote:
On 02/04/2016 21:31, David Lang wrote:


Let's make it easier;
Cost £2
Selling £3
Profit £1

That's a 50% mark up on cost giving you a 33% profit on sales.

OK if you're selling 10,000, rubbish if you are selling 5.
Turnover is vanity, profit is sanity.

Surely that's ONLY the mark-up on the item. 20% VAT, operating expenses,
postage sending the item, credit card costs, wages etc. may make the £3
selling price a loss and not a profit.


OK gross profit.


--
Dave - The Medway Handyman

On 02/04/2016 22:07, David Lang wrote:
OK if you're selling 10,000, rubbish if you are selling 5.
Turnover is vanity, profit is sanity.

My objective with this (more as a hobby than a business) is to generate
enough profit to pay for 4 air fares a year for holidays. So far I have
managed to do this for the last 3 years.The items I `make` cost between
5p and 15p to produce, not high volume but it gives me something to do
in retirement.

On 02/04/2016 22:18, ss wrote:
On 02/04/2016 22:07, David Lang wrote:
OK if you're selling 10,000, rubbish if you are selling 5.
Turnover is vanity, profit is sanity.

My objective with this (more as a hobby than a business) is to generate
enough profit to pay for 4 air fares a year for holidays. So far I have
managed to do this for the last 3 years.The items I `make` cost between
5p and 15p to produce, not high volume but it gives me something to do
in retirement.

OK. You have to work out;
How much you need to make to pay for the holiday.
Add overhead e.g. labour, postage, packaging, advertising, transport,
accountants fees etc. remember that you can offset part use of house as
business premises, pay your wife if she doesn't use her tax allowance etc.
Divide that by the number you could reasonably make/sell.

So, assume you need £1000 for the holiday
Maybe you consider your labour as the profit.
Add total overhead say £200.
That's £1200.

If you can make/sell 1000 you need to make £1.20 on each.
If you can only make/sell 50 you need to make £24 on each.

With a small business it's not about percentages, it's about money.

I could easily make a 500% profit selling screws, wall plugs etc at a
boot fair. If I only take £40 less the cost of pitch I've made bugger
all money.

--
Dave - The Medway Handyman

On 02/04/2016 22:18, ss wrote:
On 02/04/2016 22:07, David Lang wrote:
OK if you're selling 10,000, rubbish if you are selling 5.
Turnover is vanity, profit is sanity.

My objective with this (more as a hobby than a business) is to generate
enough profit to pay for 4 air fares a year for holidays. So far I have
managed to do this for the last 3 years.The items I `make` cost between
5p and 15p to produce, not high volume but it gives me something to do
in retirement.


In that case, it doesn't really matter. I've always paid for air fares
in pounds - not in percentages!
--
Cheers,
Roger
____________
Please reply to Newsgroup. Whilst email address is valid, it is seldom
checked.

In article , alan_m
writes
On 02/04/2016 21:31, David Lang wrote:


Let's make it easier;
Cost £2
Selling £3
Profit £1

That's a 50% mark up on cost giving you a 33% profit on sales.

OK if you're selling 10,000, rubbish if you are selling 5.
Turnover is vanity, profit is sanity.

Surely that's ONLY the mark-up on the item. 20% VAT, operating
expenses, postage sending the item, credit card costs, wages etc. may
make the £3 selling price a loss and not a profit.


Gross margin as opposed to net margin
--
bert

In article , David Lang
writes
On 02/04/2016 21:17, ss wrote:
Not quite DIY:
Not having used mark up and margin for years I am now confused as to
what my profit is in % terms.
example:
cost price £1.89
sell price £2.89
Profit is £1.00

But should I log this as 53% profit based on cost price
OR 34% profit based on selling price.

At the moment I am thinking it should be 53% based on cost.

Let's make it easier;
Cost £2
Selling £3
Profit £1

That's a 50% mark up on cost giving you a 33% profit on sales.

Or as we used to say mark up of 50% and margin of 33%
OK if you're selling 10,000, rubbish if you are selling 5.
Turnover is vanity, profit is sanity.




--
bert

On 02/04/16 21:17, ss wrote:
Not quite DIY:
Not having used mark up and margin for years I am now confused as to
what my profit is in % terms.
example:
cost price £1.89
sell price £2.89
Profit is £1.00

But should I log this as 53% profit based on cost price
OR 34% profit based on selling price.

At the moment I am thinking it should be 53% based on cost.

Ask your accountant, but in my head the margin is 53% but the gross
profit is 34%.



--
Ideas are more powerful than guns. We would not let our enemies have
guns, why should we let them have ideas?

Josef Stalin

On Sat, 2 Apr 2016 21:17:22 +0100, ss wrote:

Not quite DIY:
Not having used mark up and margin for years I am now confused as to
what my profit is in % terms.
example:
cost price £1.89
sell price £2.89
Profit is £1.00

But should I log this as 53% profit based on cost price
OR 34% profit based on selling price.

At the moment I am thinking it should be 53% based on cost.

Depends which profit you are talking about:

https://en.wikipedia.org/wiki/Profit_margin

--
AnthonyL

ss wrote

Not quite DIY:

Corse it is instead of getting the accountant or book keeper to do it.

Not having used mark up and margin for years I am now confused as to what
my profit is in % terms.
example:
cost price £1.89
sell price £2.89
Profit is £1.00

But should I log this as 53% profit based on cost price

Yes.

OR 34% profit based on selling price.

Nope.

At the moment I am thinking it should be 53% based on cost.

Yes.

On 02/04/2016 21:58, Rod Speed wrote:
At the moment I am thinking it should be 53% based on cost.

Yes.

Let me elaborate, more as a hobby but I sell some stuff on ebay. I have
done a spreadsheet that works out how much profit I make in £s for each
item, the spreadsheet takes account of all charges and costs giving me a
net profit in £s. This allows me to very quickly to show how much profit
I make in £s.
To update it I thought I will show the profit as a % and thats when I
stumbled thinking should it be on cost or selling price.

On Saturday, 2 April 2016 22:09:57 UTC+1, ss wrote:
On 02/04/2016 21:58, Rod Speed wrote:
At the moment I am thinking it should be 53% based on cost.

Yes.

Let me elaborate, more as a hobby but I sell some stuff on ebay. I have
done a spreadsheet that works out how much profit I make in £s for each
item, the spreadsheet takes account of all charges and costs giving me a
net profit in £s. This allows me to very quickly to show how much profit
I make in £s.
To update it I thought I will show the profit as a % and thats when I
stumbled thinking should it be on cost or selling price.

best to know both!


NT

On 02/04/2016 22:30, wrote:
On Saturday, 2 April 2016 22:09:57 UTC+1, ss wrote:
On 02/04/2016 21:58, Rod Speed wrote:
At the moment I am thinking it should be 53% based on cost.

Yes.

Let me elaborate, more as a hobby but I sell some stuff on ebay. I have
done a spreadsheet that works out how much profit I make in £s for each
item, the spreadsheet takes account of all charges and costs giving me a
net profit in £s. This allows me to very quickly to show how much profit
I make in £s.
To update it I thought I will show the profit as a % and thats when I
stumbled thinking should it be on cost or selling price.

best to know both!

Agreed!

Best to now tell us what you make, we might want to buy some!


--
Dave - The Medway Handyman

On Sat, 02 Apr 2016 22:09:50 +0100, ss wrote:

On 02/04/2016 21:58, Rod Speed wrote:
At the moment I am thinking it should be 53% based on cost.

Yes.

Let me elaborate, more as a hobby but I sell some stuff on ebay. I have
done a spreadsheet that works out how much profit I make in £s for each
item, the spreadsheet takes account of all charges and costs giving me a
net profit in £s. This allows me to very quickly to show how much profit
I make in £s.
To update it I thought I will show the profit as a % and thats when I
stumbled thinking should it be on cost or selling price.

It's whatever you want it to be, whatever makes sense to you.

--
Condoms should be used on every conceivable occasion.

On 02/04/2016 22:09, ss wrote:
On 02/04/2016 21:58, Rod Speed wrote:
At the moment I am thinking it should be 53% based on cost.

Yes.

Let me elaborate, more as a hobby but I sell some stuff on ebay. I have
done a spreadsheet that works out how much profit I make in £s for each
item, the spreadsheet takes account of all charges and costs giving me a
net profit in £s. This allows me to very quickly to show how much profit
I make in £s.
To update it I thought I will show the profit as a % and thats when I
stumbled thinking should it be on cost or selling price.


Think of it as the return on an investment. If you invest £100 and earn
£50 interest (some hopes!) in order to end up with £150, you'd regard
that as a return of 50% not 33.33% wouldn't you?
--
Cheers,
Roger
____________
Please reply to Newsgroup. Whilst email address is valid, it is seldom
checked.

"ss" wrote in message
...
On 02/04/2016 21:58, Rod Speed wrote:
At the moment I am thinking it should be 53% based on cost.

Yes.

Let me elaborate, more as a hobby but I sell some stuff on ebay. I have
done a spreadsheet that works out how much profit I make in £s for each
item, the spreadsheet takes account of all charges and costs giving me a
net profit in £s. This allows me to very quickly to show how much profit I
make in £s.
To update it I thought I will show the profit as a % and thats when I
stumbled thinking should it be on cost or selling price.

In your situation its the calculation based on your costs that matters.

The main time the other approach is used is when comparing
the how profitable operations are with their competitors etc,
like for example when comparing how well supermarkets do
compared with their competitors when deciding which one
is the better prospect when say deciding whose shares to
own, when just considering the profit margin they have.

"ss" wrote in message
...
On 02/04/2016 21:58, Rod Speed wrote:
At the moment I am thinking it should be 53% based on cost.

Yes.

Let me elaborate, more as a hobby but I sell some stuff on ebay. I have
done a spreadsheet that works out how much profit I make in £s for each
item, the spreadsheet takes account of all charges and costs giving me a
net profit in £s. This allows me to very quickly to show how much profit I
make in £s.
To update it I thought I will show the profit as a % and thats when I
stumbled thinking should it be on cost or selling price.


What is not understood is why you need to know this.

As someone else pointed out, you don't go into the shop and pay them with
"percentages".

If you are comfortable with the margin/profit that you make why difference
does it make what percentage it is? You aren't a listed company looking to
increase your share value.

tim

In article , ss
writes
On 02/04/2016 21:58, Rod Speed wrote:
At the moment I am thinking it should be 53% based on cost.

Yes.

Let me elaborate, more as a hobby but I sell some stuff on ebay. I have
done a spreadsheet that works out how much profit I make in £s for each
item, the spreadsheet takes account of all charges and costs giving me
a net profit in £s. This allows me to very quickly to show how much
profit I make in £s.
To update it I thought I will show the profit as a % and thats when I
stumbled thinking should it be on cost or selling price.

Whichever you want it to be.
What really matters to any business is cash flow.
Do you have enough cash in the bank to pay your air fares when you wish
and still have enough to keep your business going?
--
bert

On 03/04/2016 20:40, bert wrote:
Whichever you want it to be.
What really matters to any business is cash flow.
Do you have enough cash in the bank to pay your air fares when you wish
and still have enough to keep your business going?

Yes I dont need the ebay money to pay for it, its just how my mind works
like it lets me think I have got my hols for free :-)
I do the same with DIY if I buy a bunch of screws I use what I need and
sell the rest on ebay to cover my cost so the screws were free.

The `business` overheads putting ebay charges/postage and my time aside
are almost zero, approx £5 per month.

On 02/04/2016 21:17, ss wrote:
Not quite DIY:
Not having used mark up and margin for years I am now confused as to
what my profit is in % terms.
example:
cost price £1.89
sell price £2.89
Profit is £1.00

But should I log this as 53% profit based on cost price
OR 34% profit based on selling price.

At the moment I am thinking it should be 53% based on cost.

Either way it's profit before tax. 20%? 40%? 45%?

(Hint: saying that "My objective ...is to generate enough profit to pay
for 4 air fares a year for holidays" gives HMRC a knock-down argument
that it ain't just a hobby. Advertising too would probably put you out
for the count - if they could be bothered.)

--
Robin
reply-to address is (intended to be) valid

"Robin" wrote in message
...
On 02/04/2016 21:17, ss wrote:
Not quite DIY:
Not having used mark up and margin for years I am now confused as to
what my profit is in % terms.
example:
cost price £1.89
sell price £2.89
Profit is £1.00

But should I log this as 53% profit based on cost price
OR 34% profit based on selling price.

At the moment I am thinking it should be 53% based on cost.

Either way it's profit before tax. 20%? 40%? 45%?

(Hint: saying that "My objective ...is to generate enough profit to pay
for 4 air fares a year for holidays" gives HMRC a knock-down argument that
it ain't just a hobby.

It doesn't matter if it is a hobby, if you make a systematic profit it's
still taxable (subject to the normal allowances).

The point about HMRC not being interested in taxing money that people make
from their hobby is that usually the hobbyist has large amounts of sunk
expenses that can theoretical be claimed against that profit.

Trawling through all of that to find that 99% of hobbyist make a loss, to
catch the other 1%, just isn't worthwhile.

tim

On 03/04/2016 11:54, tim... wrote:
(Hint: saying that "My objective ...is to generate enough profit to
pay for 4 air fares a year for holidays" gives HMRC a knock-down
argument that it ain't just a hobby.

It doesn't matter if it is a hobby, if you make a systematic profit it's
still taxable (subject to the normal allowances).

The point about HMRC not being interested in taxing money that people
make from their hobby is that usually the hobbyist has large amounts of
sunk expenses that can theoretical be claimed against that profit.

Trawling through all of that to find that 99% of hobbyist make a loss,
to catch the other 1%, just isn't worthwhile.

HMRC can dig all they want as although I am retired my pensions have not
yet kicked in so I am well below any threshold, I dont receive any
benefits but my wife still works (due to raised retirement age) so that
is our main income. And she is a fully qualified financial advisor
which does help.

On 03/04/2016 12:13, ss wrote:


HMRC can dig all they want as although I am retired my pensions have not
yet kicked in so I am well below any threshold, I dont receive any
benefits but my wife still works (due to raised retirement age) so that
is our main income.

Yep, that makes profit before tax same as profit after tax. As well as
guaranteeing HMRC won't dig as there's no money in it for them.



--
Robin
reply-to address is (intended to be) valid