Question 1

What is the difference between margin and markup?

Accepted Answer

Margin is profit as a percentage of the selling price; markup is profit as a percentage of cost. A product bought for $50 and sold for $100 has a 50 percent margin but a 100 percent markup. Confusing the two systematically underprices your work.

Question 2

What is a good profit margin for a small business?

Accepted Answer

It varies enormously by industry. Restaurants often run 3 to 8 percent net; professional services 15 to 35 percent; retail 2 to 10 percent; software much higher. Compare against your own industry benchmark, and watch gross margin trend over time rather than any single number.

Question 3

How much do credit card fees really cost me?

Accepted Answer

Typical processing runs 2.5 to 3.5 percent plus a flat 10 to 30 cents per transaction. On a $10 ticket, 2.9 percent plus 30 cents is 5.9 percent of the sale, more than double the headline rate. Small-ticket businesses feel processing far more than the sticker rate suggests.

Question 4

Should I discount to win more volume?

Accepted Answer

Only if the required extra volume is realistic. At a 40 percent margin, a 10 percent discount requires 33 percent more sales just to stand still. The math gets worse as your margin gets thinner, which is exactly when businesses are most tempted to discount.

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