Profit Margin and Price Markup Calculation and Formulas [Excel]

In this post I am going to run through some Business Maths; to those that are heaving a sigh and have a mental block on maths, I feel your pain. As a high school student my issue with maths in a classroom was always how the examples were relevant to the real world, it was all poles and shadows, angles and area of odd shapes. In Business Maths and Business Statistics everything always ties back to a real problem, or the need for an answer that must be quantified or qualified. The problem could be how much production, how much money, how much profit or simply how many sales days to break-even? This automatically gives relevance to the numbers that you are working with because you are working with money, time (days, weeks, months, quarters, years) and the answer either tell you whether you are mistakes which will cost you money or doing it right and making profit.

This post is fairly high-level and expects you to understand basic maths. We’ll explain some of the concepts and cover Selling Price, Mark-up Percentage, Gross Margin Percentage, and Selling Price Margin which are the sales formulas for businesses. We additionally cover some of the terminology like net, gross, and cost of goods which you hear business people talk about. As we go along we’ll make mention of price-points and other marketing terminology which you might find interesting to look up, and some other academically worthwhile things, that you may or may not know.

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Product Life-cycle

I was asked during an interview at South Africa’s biggest mobile Telecom companies years back about the Product Life-Cycle. The interview had been going extremely well at that point and one of the line managers asked whether I had an understanding of “the product life-cycle” and I blanked out. To this day thinking back I kick myself because I studied the product life-cycle and I was a product manager and ate, slept and dreamt this stuff. So on that topic I am going to put it down for the world so that you hopefully don’t blank out when you get asked this question, ever.

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