25.03.2014 174088

Some businessmen still confuse the concept of margin with the concept of trade margin and set prices for their goods, guided solely by the example of competitors. No wonder they go broke! Maxim Gorshkov, an analyst at the Academy of Retail Technologies company, gives several tips and formulas with which you can set not only non-ruining, but also profitable prices.

Commercial analyst at the Academy of Retail Technologies. He has 14 years of experience in the fashion industry, including as director-curator of the Sportgrad retail chain and Sportcourt high-end sports stores, as well as director of the Nike retail chain. Specializes in commercial and financial analytics of retail businesses.
www.art-rb.ru

Markup and margin - “two big differences”

In the business environment, you sometimes hear a phrase like “This company operates on a 200% margin,” which is actually incorrect, since in this case we are not talking about margin, but about markup. Unfortunately, these two concepts are often confused. Let's dot the i's and figure out what margin, markup and markup coefficient are.

When purchasing a product from a supplier, we pay a certain amount of money for it. For example, 1000 rubles per pair. This is the purchase price. When the product arrives at the store, we add an additional cost to it so that the buyer pays 3,000 rubles for a pair, which is the retail price of the product. There is also such a thing as the actual price - the price at which the product was actually sold as a result of promotions or loyalty card discounts. Having decided on the types of prices, we can understand what margin is. Margin- this is the share of added value in the retail price of a product, that is, the difference between the retail and purchase prices. It shows how much profit the company will receive if we sell the product at a given retail price. In our example, the margin, that is, the share of added value, is 2000 rubles, or 66.6%. But no matter what examples we give, the margin will always be lower than the retail price. So if you hear someone talk about margins exceeding 100%, know that they are confusing margin with markup. Trade margin- this is a certain premium on the purchase price of the product, that is, by how many percent the retail price exceeds the purchase price. In our example, the trade margin is 200%. Relatively recently, the indicator began to be used in retail trade markup coefficient. It, like the trade margin, demonstrates the ratio of the retail price to the purchase price, but is expressed not in relative (percentage) but in absolute terms, and is used only for simple calculations. The markup coefficient in our example is 3: this is exactly how many times the retail price is higher than the purchase price.

The question arises: which indicator should be used in the work? From the point of view of financial accounting and budgeting, the margin indicator is the most important, since many other calculations are associated with it. But for simple operations you can use all other indicators.

How to Set Prices That Will Make a Profit

It is possible to cover all costs and ensure profit, for which any normal business operates, with the help of a well-calculated trade margin. Our goal is to use it to set a retail price that will cover all fixed and variable costs, and will be as high as possible given the solvency of your customers. Don’t be shy about selling at a high price: if a product is bought even at a very high price, it means it’s worth it. Also, there is no need to go to the other extreme, selling goods at cost or even below it - but this happens! Remember that low prices not only fail to earn you customer loyalty, but will slowly but surely ruin you - especially if you can't actually afford the pricing games. To set the right prices for your store, first ask yourself a few questions.

What is the cost of the product? Calculate the costs you incur when receiving goods in your store. They always include the purchase cost, and for non-franchise stores, most often the delivery cost. For companies that themselves produce and then sell the product range, the cost of goods includes the costs of raw materials, labor, designer labor and other costs.

What is the threshold price level? The threshold price is the minimum price of a product that ensures the company breaks even. It includes all costs that must be paid even if you make a discount on the product. Some sellers, inspired by the example of online competitors, reduce prices in an effort to please the buyer. But often they do not take into account the fact that networkers can really afford such price games, because they sometimes get the goods several times cheaper than for a private entrepreneur. As a result, the store owner, without calculating his threshold price, enters into a price race with a large retailer and works at a loss. He can do this until he finally goes broke or drops out of the race. By raising the price back, the seller will most likely lose customers - after all, they came to him only because of the low price - and will again be on the verge of ruin.

What is the price situation in the industry? Of course, you must understand what prices your competitors work with, and what prices consumers are willing to buy your products at.

Is demand for your products elastic? Demand is said to be elastic if it changes when price decreases or increases. Only in this case does it make sense to give a discount on the product, otherwise you won’t be able to make money. If demand is inelastic, that is, sales do not increase when the price decreases or increase only slightly, you will not be able to make a profit from selling such a product. Since in a shoe store there are categories of goods with different elasticities of demand, you must measure and calculate the elasticity of each of them using the formula E = K/C, where K is the percentage change in demand, and C is the percentage change in price.

Will additional services help increase sales? One of the most attractive services for buyers now is a consumer loan for shoes. So far, only a few companies sell shoes this way, and this is strange, because the seller does not incur any costs, but only enjoys increased sales.

What price is the buyer willing to pay for the product? This indicator depends on many factors, for example, the location of the store and the income of the target audience. When we know the exact profile of the buyer, we understand well what exactly he needs and how much money per month he is willing to spend on shoes. For example, after all expenses, a client of our store has about 6 thousand rubles per month left, which means that we can set approximately the same price for most models in the store. But this is the average price, so we must add two more steps to it: 25% down and 25% up from the price. Making a price step of more than 25% in one store is not reasonable, since such a price range will blur your target audience and force you to compete with more expensive or cheaper stores, which is not at all interesting to you or your customers.

What is the nature of competition? Competition is like radiation: it is always and everywhere, but it is not visible. But you must still keep your finger on the pulse of your competitors and perform better than them. The one who monitors his rivals opens 200-300 stores a year, and the one who sells goods at cost and does not learn anything from others works with one store all his life.

Once you've figured out your pricing options and desires, use one of several pricing methods.

Method one: average costs + profit. This is a fairly simple and effective method of pricing, which is based on costs - and this is very important - although it does not take into account changes in the market and does not show to what extent prices can be reduced during a sale. The essence of the method is to obtain the price of a product from the sum of all costs for the reporting period and the desired share of profit. For example, we purchased goods for the season for 5 million rubles, and found out that the total costs for the same period will be approximately 8 million rubles. If we make a markup on goods in the amount of 100%, then our profit will be only (5x2)-8 = 2 million rubles, and if we make a markup of 150%, then the inventory in monetary terms will be equal to 12.5 million rubles, which, ideally, will bring us 4.5 million rubles. It is clear that there are no “ideal” cases: the season always ends with something left over, and the market dictates its conditions to us. Some of the assortment will be sold at a discount, so in this situation a 150% markup will at least allow us to stay afloat.

Method two: price calculation based on break-even analysis. In business there is such a thing as a break-even point. The essence of the break-even principle is to establish the sales volume at which there will be no losses. The break-even point is always calculated for new businesses, since with its help it becomes clear how long the store will operate without profit, only to cover the initial investment. Some elements of break-even analysis can also be used for pricing, and this method will help us figure out what the minimum profit necessary for the survival of the business should be (something that the “average cost + profit” method cannot provide). To determine the minimum profit rate, you need to subtract variable costs from the volume of planned gross revenue and divide the resulting number by the volume of planned gross revenue. For example, (15 million – 5 million)/15 million = 0.5. This coefficient suggests that the difference between the purchase and sale prices should be 50%, otherwise we will work at a loss. Using this method, you can also calculate the trade margin. To do this, use the formula “1-(volume of planned gross revenue/variable costs)*100%”. In our example, the following calculation can be obtained: 1-(15 million/5 million)*100% = 200%. This is exactly what the trade margin should be so that we at least cover all costs without earning anything. The upper price limit is dictated only by common sense: we should sell as expensive as possible, without listening to those who advise selling the product cheaper. As a rule, such advisers are people of low social status who understand little about making money.

In principle, these methods are enough to set prices that are adequate for your business. But in some cases prices are set in other ways. In particular, "current price method", when competitors’ prices are taken as a guide: this method has not yet taken root in the fashion segment, but electronics retailers are already using it. Its advantage is that it vetoes price wars, but not all stores can afford to maintain the same prices with large chain stores. "Dumping price method" used to attract buyers. Its essence is to set low prices for bestsellers, that is, for particularly attractive goods, although the prices for all other goods may even be inflated. This method can provoke price wars and give the store the image of a cheap establishment, so it should be used with caution. "Method for measuring elasticity of demand" good because it can be used to track the dependence of sales growth and profits on price changes, and the method "purchasing behavior analysis" used at the stage of introducing a new product to the market.

Some businessmen still confuse the concept of margin with the concept of trade margin and set prices for their goods, guided solely by the example of competitors. No wonder they...

And the markup on clothes and alcohol can exceed 300%

Prices are rising inexorably, but the income of the population is not very good: now half of the salary is spent on food alone, as sociologists have calculated. And you can’t really pamper yourself with updating your wardrobe during a crisis: you have to wait for sales, otherwise you won’t be able to afford the “clothes.” Alcohol is also becoming more expensive, so even drinking out of grief is expensive. But our wallets are clearly emptying for someone else’s benefit: manufacturers and stores make huge profits from markups on goods that increase their real cost by 2-3 times. "MK" tried to figure out how trade profits from buyers.

The supply chain for each of our purchases looks like this: manufacturer - distributor - retail. Of course, all participants in this scheme strive to earn more, so at each stage the initial cost of the product increases noticeably. The cost itself consists of two components: the cost of raw materials and the cost of production (salaries of employees, electricity, equipment maintenance). Plus, the manufacturer pays taxes and excise taxes, and then sells the goods to a wholesale intermediary or directly to retail at the selling price, including his profit percentage. As experts explain, the retail sales market is now dominated by retail - large retail chains that purchase directly from the manufacturer in order not to overpay for the services of wholesalers and thus maintain relatively low prices due to large volumes of turnover. And small stores continue to purchase from wholesale stores or intermediaries, so the cost of goods there is often higher. At the same time, retail is not limited in any way in increasing prices, except... no, not conscience, but competition: if they don’t buy it, it means it’s cheaper in the next store. If another store is too far away or closes early, then the merchants hold all the cards: as long as there is demand, prices can be set at the most “biting” level. We compared prices in different stores and found out that the cost of exactly the same products can differ by 20–30%, which goes into the retail pocket.

Food chaos

According to the harsh laws of trade, the fastest rise in prices always occurs for food products - a person cannot do without them and will buy under any circumstances. Therefore, in a free market, manufacturers and stores can speculate on the price of products as they wish. “Prices are now not limited by the state, as in Soviet times, but supply is not limited either. Therefore, now the main protector of the consumer is competition. If we don't like the price in one store, we go to another. Fortunately, there are shops at every turn in the city, and large hypermarkets are within transport accessibility. However, in one single general store for the entire village, the markup can be 100–200%,” Petr Shchelishch, chairman of the Russian Consumer Union, told MK.

But is competition really that effective in the fight for affordable prices for consumers? For the purity of the experiment, we visited three metropolitan stores accessible to a resident of one block: a retail chain of the lower segment of the “next door” format, a non-chain store “Products 24” near a transport stop, where there is a lot of traffic, and one of the largest hypermarkets, which is located from the nearest There is a free bus stop. We also examined the price list of one of the large wholesale bases in Moscow - a supplier of non-chain retail.

As can be seen from the table, even in stores closest to each other, prices can differ significantly, and the total difference in the cost of the set of products in question is about 300 rubles - that’s competition for you... But here you have to choose: run into a store on the road, but overpay, stand in a long line at a low-price retail chain, but save, or spend several hours traveling to a hypermarket in search of the same savings.

However, even the lowest prices in retail are much higher than the cost at which products are sold from enterprises - this difference is how retail earns its pretty penny. The report “How prices and quality of food products are formed (consumer's view)”, prepared by the Russian Consumer Union, contains data on the shares of production costs, intermediary markups and retail trade organization profits in the final price of various products. Thus, the cost of bread is 37% of the price, milk - 27%, frozen fish - 24%, sunflower oil and meat products - no more than 10%. Intermediaries add another 25-30% to the price of flour from which bread is made, sunflower oil - 27%, fish - 20-23%, pasta - 19%, sugar - 16%. Finally, the store makes a markup of 20 to 50%, and from the sale of pasta it receives 9% of net profit, fish - 7–10%, milk, sunflower oil, eggs, sugar, flour - about 6%. Note that all these figures are relevant for domestically produced products that are not imported into Russia.

The size of the markup in retail depends on the category of products and industry characteristics of production, notes Dmitry Vostrikov, director of Rusprodsoyuz. For example, the markup on flour in retail is more than 50% - this is one of the highest indicators among products. “Production capacity at flour manufacturing enterprises is twice as high as demand, and due to high competition, enterprises operate on the edge of profitability, making a profit of only 1-4%. The profitability of chicken meat production is somewhat higher, and the price is more affordable for the population. This happens because the bird gains marketable weight within 2–3 months of fattening, and its cost is much lower than pork, lamb and beef,” the expert said.

The cost of a product depends on raw material prices, the depth of product processing, packaging and organization of business processes, and production workload, the head of Rusprodsoyuz emphasizes. According to him, the real purchasing power of the population and competition in the category also affect the selling price and profitability.

If we present these values ​​in monetary terms, then using the example of chicken with an average cost of 133 rubles per kilogram, the retail price structure will look like this: cost - 87.5 rubles, manufacturer's markup - 10 rubles, taxes - 8 rubles and retail markup - 27.5 ruble

Of course, one can ask a rhetorical question: aren’t it a shame for manufacturers, intermediaries, retailers, as well as the state with its taxes, to take considerable interest from citizens above the cost? But in fact, it turns out that an impressive markup accrues in the sum of the markups of each participant in the distribution chain. Even consumer rights advocate Peter Shchelishch is in no hurry to accuse the food industry of excessive greed. “Contrary to stereotypes, the food industry is one of the lowest-margin industries, in which the profitability of manufacturers is higher than that of retailers - 6–7% of net profit for enterprises versus approximately 3% for trade. However, retail is by no means in poverty: due to turnover, the amount of net profit is considerable,” the expert concluded.

Excise tax is more expensive than vodka

In 2016, the Russian budget received 1.3 trillion rubles from excise taxes - a huge figure, considering that these funds were actually withdrawn from the pockets of consumers. Excise tax is an indirect tax paid by producers of consumer goods (alcohol, tobacco, gasoline), included in the selling price and, accordingly, the retail price of the product. Excise taxes are an important source of revenue for the federal treasury, but because of it, taxed goods are very expensive: sometimes the tax amount is three times the cost of the product. An example of such “unfair” pricing is vodka.

According to Rosstat, the average price of a 0.5-liter bottle of vodka in Russia is 280 rubles. Its production costs 48 rubles - this is the cost, which includes the cost of raw materials, packaging and other expenses, including advertising. Plus, the manufacturer makes its own markup - about 11 rubles. When a bottle hits retail, its price increases by an average of 89 rubles. The remaining 132 rubles is the excise tax levied by the state, almost equal to the cost price and the store's markup combined. Thus, for a traditional Russian strong drink, we overpay almost 5 times, based on cost.

It is curious that the range of prices for vodka in Russian stores is very large, despite the fact that since 2010 the state, in order to combat illegal products, has set a minimum price for this alcohol - 190 rubles per half liter. Nevertheless, in retail chains you can see vodka for 191 rubles, while a little further away there will be a beautiful bottle with exactly the same “contents”, but for 500 rubles. Despite the tempting inscriptions on the label of expensive vodka from the series “made using deep purification technology” or “made from melt water from the top of Everest,” it is made from the same raw materials (alcohol) as cheap ones, and is subject to the same excise tax, the director explained Center for Research of Federal and Regional Alcohol Markets (CIFRRA) Vadim Drobiz, explaining the difference in price. “By buying a premium product for 300 rubles or more, consumers pay for image and self-esteem. The director of a company in an SUV will not drink the cheapest vodka! To some extent, the high price of an expensive product subsidizes the low cost of its economical counterpart. At the same time, the cost of premium vodka is higher, but not due to the raw materials, but due to the costs of advertising, packaging, marketing - everything that forces the consumer to buy this product for a lot of money,” the expert believes.

What is expensive is what is branded

As trade experts note, the fashion industry is considered the most profitable industry. In clothing and shoe stores, the markup on goods can exceed their selling price by 10–20 times, and all because we are ready to overpay for the brand. Business Insider magazine conducted a study in which it identified 37 products with the highest markups. It turned out that the list included mainly wardrobe items. For example, branded sunglasses lead in terms of markup - plus 1329%. Women's underwear is sold at 1100% above cost, and jeans on the shelves are 650% more expensive.

At the same time, 85% of the Russian clothing and footwear market is represented by imported goods. They reach our stores mainly from Southeast Asia, having overcome customs and long distances. But logistics and “customs clearance” are two serious expense items in the formation of the retail price for all imported goods: on average, from 40 to 55% of the original cost of the goods is spent on paying duties, taxes and delivery. Therefore, many advanced fashionistas prefer to shop abroad: the difference in price for the same item in the collection of a global brand can be 30–50%. And thanks to the tax free system, you can also partially refund the value added tax that residents of the country pay, but foreigners are not required to do this.

At the same time, in the wake of import substitution and the fall of the ruble in the past two years, some global brands opened their production in Russia. As Igor Ulyanov, executive director of Soyuzlegprom, told MK, it has become more profitable for many companies to sew in Russia than in China. “In recent years, the level of wages has increased in China: a seamstress there receives approximately $500 a month, and her Russian colleague receives 12 thousand rubles, that is, approximately $200. Reducing wage costs affects the cost of goods downward, but the final price is determined by brands depending on their markup policy,” said an industry representative. As for Russian-made clothing and footwear, many enterprises now operate with a profitability of no more than 3–5%, he noted. At the same time, retail on clothes “made in Russia” earns much more than manufacturers, unlike the food industry. “Stores set a net profit of at least 20–30%, and even this seems not enough to them, since in the “fat years” the profitability of the clothing and footwear business was 100–200%,” the expert added.

Why do we overpay, as the MK study showed, by two, three or more times even for the most ordinary goods? The laws of the free market dictate their own rules of trade, and they are not always in favor of the consumer. Since there is demand, sellers will not reduce prices. At the same time, the situation on the Russian market is aggravated by domestic specifics: long distances and complex logistics, as well as ill-conceived and confusing taxes. All these misfortunes are also transferred to the shoulders of the consumer. There is no point in counting on the state to bring order to prices in some administrative way. This means that all hope is for the development of competition. But the previous quarter century of building a market economy in our country clearly did not justify this hope...

Hello to all my readers! Today I’m answering a question from several readers, but I’m doing it not in the section, but in the general feed, because I want everyone to know about it once and for all and not ask such a question! I looked at the queries in search engines and saw that there were queries, but no answers! More precisely, there are answers about what kind of markup to make, but there are incomprehensible numbers taken from the ceiling and it is not clear where the author took them from. I’m used to explaining everything, so I’ll answer the question with a full but short article. So, let's begin!

What markup should I make?

In my opinion, this is the simplest thing that can be. If you purchase goods and then resell them, or if you provide services, you must understand that you need to get a profit and it is unlikely that you will buy something for 10 rubles and sell for 11. This is a small markup and, in principle, it exists be with a high receipt (wholesale). Okay, let's go in order, how can you determine the markup?

1. Rely on competitors' prices.

As easy as pie. We looked at the price of competitors, figured out whether you could compete or whether the markup would be enough for you to recoup your physical costs. For example, competitors sell some product for 100 rubles. You can buy it from your suppliers for 50 rubles, the markup is 100%, you can work. But if your competitors sell for 100 rubles, and your suppliers sell for 90 rubles, then either your suppliers sell at a high price and you need to look for others, or this is not the main product of your competitors and even a minimal markup is enough for them. In general, rely on the price of competitors and dance from it. In any case, you cannot increase 100% and make the price many times higher than that of your competitors; they simply won’t buy from you.

2. If the market price is very high

If you see that your competitors’ product or service costs 100 rubles, and your suppliers or performers cost 20 rubles (500% markup), this does not mean that you should make a 100% markup and set the price at 40 rubles. If you do this, then naturally people will buy from you more actively, but this dumping (a strong reduction in price compared to the market price) will lead to the rapid saturation of consumers with those goods or services that your business will not survive long. Secondly, you will simply break the market and your competitors will also have to reduce their prices. You can't do that! You need to compete on quality, not price (read and understand). But if you really want to differ in price, then drop it just a little bit and customers will see it.

3. How to mark up a service

Markups for the same service can be calculated differently and, as a rule, prices on the market have a wide range. For example, let's take website development. There are studios that make websites for 10,000 rubles, and there are those who make them for 1,000,000 rubles. It all depends on positioning, quality and the client’s profile. Therefore, it is quite difficult to set a price for services.

You can simply mark up as much as you really value your work or as much as will be sufficient for the favorable functioning of your business. The main thing is to subtract all the costs associated with the provision of a particular service and proceed from this price and add to it.

But there are also services, the prices of which are mostly fixed. To determine the price of such a service, also focus on market prices.

In general, you can add a few additional touches to any service and then you can slightly increase the price. For example, when ordering website development, setting up contextual advertising as a gift.

Conclusion

In conclusion, I would like to say once again that the question of what markup to make should not arise in your head. Moreover, when choosing a product or service for your future business, you must immediately see the markup (your benefit) in order to understand whether this product or service is worth selling or not. If I'm wrong about something, please add and correct in the comments, but I've been living with these rules for a long time and they haven't let me down!

Thank you for your attention!

Best regards, Schmidt Nikolay!

A. Grishin, expert analyst at ZERKALO Consulting Group CJSC

In every company that sells, there is a difference between the amount that the buyer sees on the price tag and the amount at which the company purchased a certain product. The director focuses on market prices and instructs the accountant to make one or another trade markup. How to calculate it correctly is already a headache for the humble accounting worker.

The amount of realized trade margin, and therefore the purchase price of goods sold, can be calculated on a computer. In companies that engage in retail and use similar equipment, the markup can be determined automatically for each product sold. At the same time, it will be much easier for an accountant to determine the financial result.

However, not everyone can afford to have such expensive software. Small shops and stalls usually determine the trade margin by calculation, or, in other words, manually. Back in 1996, Roskomtorg, in its letter dated July 10 No. 1-794/32-5, approved the Methodological Recommendations for accounting and registration of operations for the receipt, storage and release of goods in trade organizations. In them, the committee proposed several options for calculating the realized trade margin. To date, there are no other official documents establishing other methods. In accordance with paragraph 12.1.3 of the methodological recommendations of Roskomtorg, the markup can be determined by the total turnover, by the assortment of turnover, by the average percentage, by the assortment of the remaining goods. Let's consider these methods in more detail.

The same percentage wants to meet

The method for calculating gross income based on total turnover, according to paragraph 12.1.4 of the methodological recommendations, is used if the same percentage of trade markup is applied to all goods. This option involves first establishing the gross income from sales turnover (VD), and then the markup.

The accountant must apply the formula given in the document: VD = T x RN: 100 (T - total turnover, RN - estimated trade markup). The estimated trade markup is calculated using another formula: RN = TN: (100 + TN). In this case, TN is the trade markup as a percentage. At the same time, according to paragraph 2.2.3 of the methodological recommendations, turnover is understood as the total amount of revenue (including all taxes).

Example 1

At Romantik LLC, the balance of goods at sales value (account 41 balance) as of July 1 amounted to 12,500 rubles. The trading margin on the balance of goods as of July 1 (account balance 42) is 3,100 rubles. In July, products were received at the purchase price excluding VAT in the amount of 37,000 rubles.

According to the order of the head of the organization, the accountant must charge a trade margin on all goods in the amount of 35 percent of their purchase price. Its amount for goods received in July was 12,950 rubles. (RUB 37,000 x ґ 35%). The company received 51,000 rubles from sales in July. (including VAT - 7780 rubles). Selling expenses – 5000 rub.

Let's calculate the realized trade margin using the formula РН = ТН: (100 + ТН):

35% : (100% + 35%) = 25,926%.

We find gross income using the formula VD = T x RN: 100:

51,000 rub. x 25.926%: 100% = 13,222 rub.

The following entries must be made in accounting:

Debit 50 Credit 90-1

– 51,000 rub. – revenue from the sale of goods is reflected;

Debit 90-3 Credit 68

Debit 90-2 Credit 42

– 13,222 rub. – the amount of trade margin on goods sold is written off;

Debit 90-2 Credit 41

– 51,000 rub. – the sales value of goods sold is written off;

Debit 90-2 Credit 44

Debit 90-9 Credit 99

– 442 rub. (51,000 – 7780 – (–13,222) – 51,000 – 5000) – profit from the sale.

This option is needed for those who have different markups for different groups of goods. The difficulty is that each of the groups includes products with the same premium. In this case, mandatory accounting of trade turnover is necessary. According to paragraph 12.1.5 of the methodological recommendations, gross income (IG) is determined by the following formula:

VD = (T1 x RN + T2 x RN + ... + Tn x RN): 100 (T – trade turnover and RN – estimated trade markup for groups of goods).

Example 2

The accountant of Romantik LLC has the data shown in the following table:

	Balance of goods as of July 1, rub.	Goods received at purchase price, rub.	Trade margin, %	Amount of markup, rub.	Revenue from the sale of goods, rub.	Selling expenses, rub.
Products of group 1	4600	12 100	39	4719	16 800	3000
Products of group 2	7900	24 900	26	6474	33 200
Total	12 500	37 000		11 193	50 000

He needs to determine the estimated trade markup for each group of goods.

For group 1, the estimated trade markup is calculated using the formula РН = ТН: (100 + ТН):

39% : (100% + 39%) = 28,057%.

For group 2:

26% : (100% + 26%) = 20,635%.

Gross income (the amount of realized trade margin) will be equal to:

(RUB 16,800 x 28.057% + RUB 33,200 x 20.635%): 100 = RUB 11,564

The following entries must be made in the company's accounting records:

Debit 50 Credit 90-1

– 50,000 rub. – revenue from the sale of goods is reflected;

Debit 90-3 Credit 68

– 7627 rub. – the amount of VAT is reflected;

Debit 90-2 Credit 42

– 11,564 rub. – the amount of trade margin related to goods sold is written off;

Debit 90-2 Credit 41

– 50,000 rub. – the sales value of goods sold is written off;

Debit 90-2 Credit 44

– 3000 rub. – sales expenses are written off;

Debit 90-9 Credit 99

– 937 rub. (50,000 – 7627 – (–11,564) – 50,000 – 3000) – profit from the sale.

This method is the simplest. It can be used by any company that records goods at sales prices. According to paragraph 12.1.6 of the recommendations, gross income by average percentage should be calculated using the formula: VD = (T x P): 100 (P - average percentage of gross income, T - turnover). The average percentage of gross income will be equal to:

P = ((TNn + TNp – TNv): (T + OK)) x 100.

Let's analyze the indicators of the last formula:

ТНн – trade markup on the balance of products at the beginning of the reporting period (account balance 42); ТНп – markup on goods received during this time, ТНв – on goods disposed of (debit turnover of account 42 “Trade margin” for the reporting period). In this case, disposal refers to the return of goods to suppliers, write-off of damage, etc. OK – balance at the end of the reporting period (account balance 41).

Example 3

The accountant of Romantik LLC identified the balance of goods as of July 1 (account balance 41). The sales price was 12,500 rubles. The amount of the trade margin on this balance is 3,100 rubles. Within a month, 37,000 rubles were received at the purchase price of goods. (excluding VAT). The markup accrued on products received in July is 12,950 rubles. During the month, income from sales was received in the amount of 51,000 rubles. (including VAT - 7780 rubles). The balance of goods at the end of the month amounted to 11,450 rubles. (12,500 + 37,000 + 12,950 – 51,000). Selling expenses – 5000 rub.

((3,100 rub. + 12,950 rub. – 0 rub.) : (51,000 rub. + 11,450 rub.)) x 100% = 25.7%.

Then we calculate the amount of gross income (realized trade margin):

(RUB 51,000 x 25.7%): 100% = RUB 13,107

The following entries need to be made in accounting:

Debit 50 Credit 90-1

Debit 90-3 Credit 68

– 7780 rub. – the amount of VAT is reflected;

Debit 90-2 Credit 42

– 13,107 rub. – the amount of trade margin on goods sold is written off;

Debit 90-2 Credit 41

– 51,000 rub. – the selling price is written off;

Debit 90-2 Credit 44

– 5000 rub. – sales expenses are written off;

Debit 90-9 Credit 99

– 327 rub. (51,000 – 7780 – (–13,107) – 51,000 – 5000 rubles) – profit from the sale (financial result).

To calculate gross income for the assortment of the balance, the accountant will need data on the amount of the trade margin for the product that was identified at the end of the reporting period. To obtain this information, it is necessary to keep records of the accrued and realized markup for each item or for groups with the same methods for calculating the trade markup. As a rule, to determine this amount, an inventory is carried out at the end of each month. This method is the most labor-intensive. It is usually used by companies either with a small turnover or those that have the appropriate software.

According to paragraph 12.1.7 of the methodological recommendations, the calculation of gross income for the range of remaining goods is carried out using the formula: VD = (TNn + TNp – TNv) – TNk. The indicators mean the following: ТНн – trade markup on the balance of goods at the beginning of the reporting period (account balance 42 “Trade markup”); ТНп – trade markup on products received during the reporting period (credit turnover of account 42 “Trade margin” for the reporting period); ТНв – trade markup on disposed goods (debit turnover of account 42 “Trade markup”); TNK – markup on the balance at the end of the reporting period.

Example 4

The amount of the trade margin related to the balance of goods as of July 1 (account balance 42) is 3,100 rubles. The accrued premium for products received in July is 12,950 rubles. During the month, the company earned 51,000 rubles from sales. The markup on the balance of goods at the end of the month, according to inventory data (account balance 42), is 2050 rubles. Selling expenses – 5000 rub. Let's calculate the realized trade margin - VD = (TNn + TNp - TNv) - TNk:

(3100 rub. + 12,950 rub. – 0 rub.) – 2050 rub. = 14,000 rub.

The following entries must be made in accounting:

Debit 50 Credit 90-1

– 51,000 rub. – revenue from the sale of goods is reflected;

Debit 90-3 Credit 68

– 7780 rub. – the amount of VAT is reflected;

Debit 90-2 Credit 42

– 14,000 rub. – the amount of trade margin on goods sold is written off:

Debit 90-2 Credit 41

– 51,000 rub. – the sales value of what was sold is written off;

Debit 90-2 Credit 44

– 5000 – sales expenses written off;

Debit 90-9 Credit 99

– 1220 rub. (51,000 – 7780 – (–14,000) – 51,000 – 5000) – profit from the sale.

In all of the methods discussed above for calculating the realized margin (with the exception of the average percentage method), the result obtained (the amount of the realized margin) can be used when calculating income tax in order to find the purchase price of the goods sold. But, for example, in accounting, interest on a loan before accepting goods is included in their cost. For tax purposes, such interest is included in non-operating expenses.

Using the method of finding the markup based on the average percentage, the purchase price of the goods sold in accounting may not coincide with the same indicator in tax accounting. This is because different groups may have different premiums. When calculating the realized markup in accounting, all data is averaged. In the tax authorities, according to Article 268 of the Tax Code, proceeds from sales are reduced by the cost of purchased goods, which is determined in accordance with accounting policies.

What is a markup on a product? Any entrepreneur who decides to engage in a trading business faces these questions. A markup on a product or a trade margin is an addition to the cost of a product, which forms the final price of its sale. An entrepreneur needs to decide on the selling prices of his own goods so that they are competitive. In addition, it is important to calculate the purchasing prices of competitors.

Businessmen are interested in the question: “what is the markup on goods called?” The issue of markup must be approached carefully, taking into account all the nuances that influence the formation of the price of the product. In terms of its value, the markup must fully cover the costs and contain the profit expected by the seller upon sale. When calculating the final selling price, it is necessary to include the purchase cost and trade margin. Plus, if the product is subject to VAT, this is also taken into account in the markup amount.

The goal of any business is to make a profit, but if you make a mistake and incorrectly set the price of the goods sold, this can lead to a drop in demand and a lack of buyers. Naturally, such a development of events will lead to losses.

How to calculate the markup on a product - approach it wisely

So, what are the important factors to consider when calculating and what steps to take?

Read also: Profit from product sales: formula

In general, you initially need to decide on your competitors’ sales strategy. Strategies for selling goods are built according to one of the principles:

• at a low price, but in large volumes;
• at a high price, but in small volumes.

The right strategic approach can help sell products at a rapid pace. The saturation of the market in a particular area with a similar product plays an equally important role in establishing the product margin. For common products that can actually be purchased in neighboring stores, the premium cannot be increased. But for a rare type of product, taking into account the relevance and demand, it is quite likely to increase.

Trade margin in retail trade

How to calculate the markup as a percentage so that it does not turn out to be unreasonably high and does not scare away buyers? Many businessmen take a mathematically simple approach to setting product markups in retail: they choose a single markup percentage for the entire product line. Other sellers study average market prices and set the same markup as the competition. In any case, the purpose of setting a markup is to increase trading revenue and generate profits. When deciding on the markup percentage, it is important to take into account the properties and quality of the product, the competitiveness of the manufacturer, demand, and relevance among buyers.

In retail trade, the percentage markup has to be calculated many times. It is important to periodically adjust the price depending on the dynamics of income generation. If such income is stable, to stimulate sales volume, various promotions and bonus discounts are introduced, thereby temporarily reducing the final price. So, you need to approach setting the percentage of trade margin in any of three ways:

• assign the same percentage for the entire product line;
• calculate individually for each group;
• calculate on average for the entire assortment.

It often happens that goods arrive at the warehouse over different periods of time from different suppliers, but they need to be sold at the same speed. Therefore, it is rational to set a single price for this product, but the markup for it will be different.

Over time, the value of the trade markup may change. It depends on the seller's turnover. Every entrepreneur strives to increase income while reducing expenses.

Under favorable sales conditions and increased profits, in order to stimulate sales volume, the seller has the opportunity to reduce selling prices by reducing the trade markup.

To minimize costs, you can resort to the use of tax incentives or savings in energy, space, availability of employees, and so on, but at the same time comply with legislation, rules and regulations.

For a mass launch of a new product, it is reasonable to plan to reduce the product margin in order to attract buyers at a low cost. A suitable launch would be holding promotions for a seasonal period, introducing a system of discounts when purchasing a certain volume of goods.

When calculating the markup as a percentage for your goods, it is reasonable to focus on the average statistical indicators for the market, which are distributed according to the segments occupied:

• food products - 10-35%;
• clothing and shoes - 40-110%;
• stationery, household goods - 25-65%;
• cosmetic products - 25-75%;
• souvenirs, accessories, jewelry - over 100%;
• auto parts - 30-65%.

Formula for calculating trade margins

To avoid errors in calculations, a special formula is used to calculate the markup as a percentage. When assigning a trade margin (TM) nominally, it is not difficult to determine it in monetary terms:

TN = ST * % TN, here ST is the cost of the goods, % TN is the percentage of the assigned trade margin.

An important and significant area of ​​running a successful business is the financial analysis of the company’s trading activities. This is done by financial and economic specialists and private entrepreneurs themselves.

TN = (RV – ST) ÷ ST, where РВ is real sales revenue, ST is the cost of goods.

A serious economic indicator for determining a trade markup is the gross income received as a result of the sale of goods. Calculate gross income based on the specifics of accounting for turnover.