# How to set prices, setting Gross Profit Margins

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How to set a price to the correct Gross profit %

To set a price to the correct gross profit margin is quite a simple task once you understand the basics.

You will need to decide the gross profit margin % you require to make on the item and the cost price excluding any VAT per unit.

Let's say you want to sell a clock, you buy the clocks in batches of 10 and each batch costs you £30.00 excluding VAT.

To cover overheads and make a living you need to make a gross profit of 60% on each clock.

Firstly you divide £30 by 10 to find the cost price to you per clock that's £3.00.  Now you have the two elements you need to set your selling price.

You know you need to make 60% G.P. therefore your cost price price must make up the other 40% of your total price net of VAT.

You next divide £3 by 40 which will give you 1% of your selling price before VAT is added.

So £3 divided by 40 gives a result of 7.5 pence, which you now know is 1% of your selling price before any VAT is added.

The next thing to do is to times 7.5p by 100 to find your selling price 100 X 7.5 = £7.50.

Now if you need to add VAT to that price you time is by 1.2 which gives a full selling price including VAT of £9.00.

You will then make £4.50 on every clock you sell.

Need to set your bar's prices and lets face it you might have a lot to set then watch this video on how my pub/bar pricing software works and visit the link to buy an instant download version.

If you are a bar / pub owner or manager I sell software that will do the process above for you for all of your products and it's time to put them up alls you will ever have to do is adjust the cost to you column and the jobs done for you.  My deluxe version will even generate a printable price list for you.

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