What is the appropriate profit margin?

[Mika]

If you are just starting out, you might be tempted to add 25-30 percent profit margins, however, setting 10 percent profit margin is most appropriate for beginners. This pricing strategy has always worked for me, and hopefully works for other people as well. If you start generating sales you can aim for 20-25 percent but as a beginner keep it under 10 percent. Having lower profit margin means you are offering cheaper products can attract buyers who are price conscious. People might be hesitant to trust you if you are new and have higher price. With a smaller profit margin, your prices can be lower than competitors', encouraging more sales and reviews.

 

[Etini]

When you want to fix profit margins for your business, you would have to consider the turnover of your business and the nature of the products. If it is common products like food that have high turnovers, you can fix your profit margin low typically lower than 10%. You would still make good money. If you are selling tangible products like electronics that doesn't sell as quick, it is fair to keep your profit margins at 20% to 25%.

Another factor that should also be considered is the scarcity level of the products or service you are selling.

 

[Suba]

Each type of business will have different profit margin benchmarks to determine whether the profit margin is considered appropriate or unappropriate. For a normal restaurant business, the margin is usually around 10%, while for service businesses such as public accountants and financial consultants, their profit margin is above 80%. To assess the margin of a business, banks and investors usually calculate the operating profit margin. Moreover, if we sell a product below market price, consumers will think it is not an original product.