How much of each sales dollar will be left after subtracting the costs of the goods sold? That number will pay fi xed costs and determine your profi t for your business. At this stage, you are trying for a broadbrush, quick and dirty forecast, so it’s okay to make a rough estimate of your average gross profit. Let’s look at how Antoinette calculates her gross profi t for her fi rst year of business. Antoinette plans to sell about half her products at double the cost she pays.
Different type businesses
A dress she buys for $125 she sells for $250. That means that her gross profi t per dress sale is 50%. She plans to derive her selling price for sale dresses, mark-downs, and accessories by adding one-half of her cost to her selling price; for example, if a belt cost her $10, she’ll sell it for $15. The calculations are similar for different type businesses. Service businesses will have higher gross profi t margins than retailers; most revenue is gross profi t because little merchandise is sold. Wholesale businesses will be similar to the retail example.
Manufacturing businesses will be similar in appearance even though the cost of goods will include materials from a variety of sources and any labor that is paid per piece. Project developers have only variable costs in each project. There are usually no fi xed costs since the developer’s business ends with the sale of the project. However, if a project developer works on several projects at the same time, he may have some fi xed costs that continue after any particular project is sold. For a project developer, the gross profi t is the difference between the project’s selling price and all the project costs.