Do you know the difference between gross profit margin and gross profit markup?


Gross Profit Margin and markup measure the profitability of a business and your project, BUT:

·        Gross profit MARGIN is the percentage of the gross profit/sale.

·        Markup is the percentage of direct costs.

·        Gross profit margin will always be lower than markup because, for example, 30% on cost will always be less than 30% on sale, as the cost cannot be higher than the sale price.

·        Gross profit margin allows you to ????????? ?????????.


???? ???????: 
Your direct costs on a project are £50 000. Adding a ???? ?? ?? ??% will give you a sale price of £65 000. Now, your profit is £15 000.

If you divide this gross profit by the sale value of £65 000, you will come up with a ????? ?????? ?????? of ??%.

If you want a ????? ?????? ?????? ?? ?? ??%, the sale must be £??,???.

Why is this important for breakeven? 

The breakeven is the minimum sale value needed to cover the company’s overheads, which include:
·       Office costs, rent, admin salaries, interest, bank fees, insurance, etc.

To cover £12 000 company overheads/month with a 30% gross profit margin, you need to achieve a minimum monthly sale of £40 000.

Only the gross profit margin can help you to calculate this figure.

Do you know your company’s breakeven point? How do you decide on taking on a new project?


Try our new free tool that can help you calculate the project’s profitability here: www.profit-calc.co.uk