What is margin and why it is important?

Margin is the lifeblood of any business.

If you want your store to be successful, then you need to make sure your margin for your products is enough to cover your costs while also making you profit so you can continue to grow.

What is Margin?

Profit margin is a percentage of sales that have turned into profits. Margin is usually calculated as net margin which means it is the percentage after deduction of taxes, cost of the product, discounts etc.

It’s what the company or business has really earned after it’s paid off everything it needed to that made selling that product possible int he first place.

Why is Margin Important?

Having an understanding of your profit margin is key to any businesses success. If you don’t know what your average margin is across your products then how do you know you are making any money for the products you sell?

Revenue will show you how much money you have made overall but not what sits in your bank account. A common phrase about revenue vs profit makes it easy to understand.

Turnover is vainty. Profit is sanity.

Sometimes you might need to make less margin on one product because costs are higher or competition means lower prices. While other times you might have a product with extremely good margins because you can buy it cheaper or you might be the only person who sells it (or very few).

Knowing the differences between your margins means you can make strategic decisions on what products to sell on your store, which ones to promote harder, how much you can spend on advertising (as you need to factor it into your margin at the end) and so many more decisions.