Profit vs Markup - How to calculate what you need to sell your jobs at for a profit

More and more these days, people need to watch their costs to remain competitive.  To this end, we’ll discuss how Cabnetware uses the Profit and Overhead percentage in the Pricing setup.

There is a big difference between Markup and Profit.  Confusing the two is one of the most common mistakes people make when setting up pricing for bidding.

Profit is the percentage of the amount you earn on the Selling Price of a job.
Markup is the percentage of the amount you earn on the Cost of a job.
 
To enter your Profit percentage, go to File Setup Pricing. Click on the Profit/Overhead/Taxes radio button and choose Edit. Enter your values.


 

How to calculate what you need to sell your jobs at for a profit

To do this you need to know what your break even percentage is and what you would like for a net profit. As an example, if your job cost is $100 and your break even plus desired profit totals 25 percent, subtract .25 from 100. You’ll get .75. Divide your $100 cost by .75 and that will give you your selling price of  $133.33. So your Markup on the $100 job would be 33.33 percent to get your 25 percent Profit.

Here is a chart that indicates what Markup value results in a given Profit percentage.



Overhead percentages in Cabnetware are calculated using the same method as the Profit percentage.

Profit and Overhead are assigned to everything uniformly in the pricing structure. You can choose to not charge the Profit/Overhead values on dollars derived from Markups / Discounts however. Uncheck the ‘Apply to Percentage’ to not add in the Profit/Overhead on the amount derived from the Markup.



(This Tech Tip is valid for all Cabnetware Products).


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