Salisbury, who coaches pool-shop owners, works through an example: a $10 bag of salt marked up 50% and sold for about $16.50 with GST. Her point is that many retailers confuse markup with margin and run loss leaders without knowing it, so they can finish a busy summer having made no money.
…for that too vehicles all your vehicle costs your Regio, your fuel, your servicing, your lease payments the whole lot your insurances, your utilities so electricity, water, internet, phone, computer software, all of it we include bookkeeping marketing, the whole lot they've all gone up as well.
They've all gone up every one of them everything. Electricity electricity something that you know has gone up massively here.
…it that's$15 now that I'm charging that out for plus I've got to then put GST on it$1.50 so that then becomes $1650. And$16.50 is probably not too far from a lot what a lot of people are charging on salt. So then you go though 50% markup is only a 33% margin and if my overhead costs are at 35% I'm making a loss you're in trouble. You're in trouble every bag of salt means you're going backwards every bag of salt you sell means you're going backwards. So and that's okay if that's a decision you want to make in your business to be a lost leader but the the the the whole point of having lost leaders is that you then sell other products and those other products are at a higher margin that covers the loss on that product. So very very important that people are aware of it. So the difference between markup and margin knowing the difference between…
So that's exactly it summer's upon us it's upon us and you everyone's going to get busier and busier and things are going to be walking out the door and if no one's making any money by the time wintertime comes it quitens off again there'll be no there'll be no buffer there.
No that's exactly it and I I I know this happens to a lot of businesses. They go but I'm really busy and they and they go and there's money in the bank so I must be doing well that does not equate to profit. It does not equate to profit and so it's it's really important that busy does not…
Yep.