Today I'm answering a question off the www.mommymillionaire.com Message Board. If you want to ask me your own question, visit www.mommymillionaire.com and post it.
Kim, I am going to sell my product wholesale to retailers. I need to know what is a reasonable profit percent for me. 56% 77% or 108%
example: my cost $3.00, wholesale $ 5.75, profit $ 2.75, profit %=91.
I don't want to work this hard for no profit but I also don't want to make the wholesale so high that the retailer can't get their keystone.
What % should I expect to work for?
Thanks, your message board has been a big help as well as the book.
Hi June,
This is a great question and I do answer it in detail in my book MOMMY MILLIONAIRE.
To be honest, your profit margin seems really slim. I don't know if you've adequately evaluated your COGS or Cost of Goods Sold to include miscellaneous costs like EDI or Electronic Data Interchange or even the cost of carrying any loans you may have taken out to fund your business. I'm not sure if you're selling to small retail or big retail, but other costs you may or may not have anticipated include advertising co-op (this is money big retailers ask you to contribute to feature your product in their sales circulars), Point-of-Purchase displays, damages (every big retailer will try and negotiate a percentage from 1% to 5% off wholesale cost for the inevitable damaged merchandise) or even shipping costs, which can be very significant.
There is no standard mark-up or profit margin percentage. It varies widely by industry and product. Some plastic injection molding companies are making single digit profit margins, while I know of some small electronic manufacturers who are working on 1000% margins. However, what will ultimately determine your profit margin is this: What is the consumer willing to pay for your product. Too many people start with their costs and add on percentages to arrive at what they need to make, regardless of whether anybody is willing to buy the product at that price.
My advice is, sharpen your pencil, look at your COGS sold again, adding on every possible charge you can think of, and see if you can make money selling it at a price a consumer is willing to pay. Remember, as your product goes into wider distribution your COGS goes down because of Economy of Scale, so you may have to be satisfied with making less than you want at the beginning in exchange for getting your product out there.
Good Luck & God Bless,
Kim Lavine
Kim is the President and Founder of Green Daisy, Inc—a lifestyle brand focused on balancing life with love ™--and the best selling author of Mommy Millionaire. Kim has appeared on The Today Show, Rachel Ray, NBC & ABC news, CNN, CNBC's "The Big Idea" with Donny Deutsch, NPR, Oprah & Friends Radio Network, LifetimeTV.com, and has been featured in USA Today, Country Living, Guideposts, Women's World, and American Baby to name a few. Kim is on a mission to encourage women to follow their dreams, inspiring them with hope, honesty and faith.
Kim’s book has been called by Publisher’s Weekly in a Starred Review: “A top-notch, how-to guide on launching a business. Lavine’s human and authoritative story make this one of the most engaging and useful resources available for readers hoping to convert their passion into a healthy company…a rare gem.” USA Today says ““Mommy Millionaire is loaded with resources for a fledgling business person…armed with a good idea and boundless energy.” Barbara De Angelis, PH.D.—#1 New York Times Bestselling Author says, “Mommy Millionaire is an inspiring gift and road map to success for anyone who’s ever had a dream.”
"Everything begins with a search for something better--a dream, an idea, the
courage to face a challenge, and the passion to get it done.
You can do it.
Believe in yourself.
Change the rules.
Join the revolution."
From MOMMY MILLIONAIRE, by Kim Lavine
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