Find formula to drive sale price based on entering gross profit percentage (not markup%). We know the cost price

[Neilads]

Hi

I’m after some expert help to find a formula that will do the following:

I want to know the sale price of my goods, when I enter the gross profit percentage that I want to make (not markup%).

I know the cost price of my goods.

For example, I want to make 50% gross profit on something that costs me £1.00. The answer I know is not £1.50 as that is only a gross profit of 33%. But I know that if I sell at £2.00 I am getting my GP at 50%, but what is the formula to work that out!

Please help!
Neil

 

[Saba Sabaratnam]

Hi Neil,

Divide your cost by percentage profit that you want to generate (e..g. 1 / 50%).


Kind regards

Saba

 

[jasonb75]

Divide your cost by percentage profit that you want to generate (e..g. 1 / 50%).

That is not correct. You divide by the cost percentage, not the profit. For 75% gross profit, you would divide by 25%

=cost/(1-profit%)

 

[Neilads]

That is not correct. You divide by the cost percentage, not the profit. For 75% gross profit, you would divide by 25%

=cost/(1-profit%)

Does this work if you want to make 200% profit?

 

[jasonb75]

Does this work if you want to make 200% profit?

With the way that you say you want to calculate your profit, 200% is impossible.

The maximum is 100%, and that is only with a zero cost value.

For a 99.99% margin (which you referred to as gross profit) an item with a cost of £0.01 would need to be sold for £100.00

 

[Neilads]

With the way that you say you want to calculate your profit, 200% is impossible.

The maximum is 100%, and that is only with a zero cost value.

For a 99.99% margin (which you referred to as gross profit) an item with a cost of £0.01 would need to be sold for £100.00

That’s where we got to here. It seems that there needs to be a non mathematical treatment to this problem. Can you think of a way around this dilemma. I think that some of our products will attract a GP of higher than 100%

 

[jasonb75]

I think that some of our products will attract a GP of higher than 100%

You can have greater than 100% for mark up, but not for margin. Even with a negative cost (somebody pays you £100 to take something that they don't want, then you sell that item for £100), the £200 that you have made from it is still only 100% (technically it is less if you deduct labour costs, etc).

 

[Neilads]

You can have greater than 100% for mark up, but not for margin. Even with a negative cost (somebody pays you £100 to take something that they don't want, then you sell that item for £100), the £200 that you have made from it is still only 100% (technically it is less if you deduct labour costs, etc).

Thank you so much for this. It has helped put into words what we couldn’t do in excel!

 

[jasonb75]

Even though it's not the answer you were looking for, hopefully it gets you moving in the direction that you need it to.

One thing that I should point out is that you can not use the =cost/(1-profit%) method if you do not have an actual cost to base the price from to begin with. For a zero or negative cost you would need to give the product / service either a physical value, or an artificial cost to provide a base for the calculation.