The industry has for a long time used the bench mark percentage margin of 100%. (why is this the magic formula?) Most progressive Retailers are now way past this Percentage and have benefited from keeping up with the times by earning more dollars for their labour.

What you must understand with this new tax system is A) You now have a new tax system which requires a new way of costing and (very importantly) B) You can not maintain the same amount of dollars in your back pocket if you maintain the same percentage mark up as you were using before GST.

Lets have a simplistic look at why your margin changes dramatically.

In Sales Tax Days
Components cost $10.00
Sales Tax is $ 2.20
Your total cost is $12.20
You mark up 100% $12.20
You sell the product for $24.00
Wahoo - you made 100% $12.20

In GST Days
Components cost $10.00
You don’t cost in GST (cause your getting it back
You mark up 100% $10.00
Add GST (aka Johny’s cut) $ 2.00
You sell the product for $22.00
You made 100% $10.00

The price has come down

Dhoop! So has the dollars your business used to earn when it sold that product. Get the picture?

Lets say last year your business sold 1000 trophies making $12.20 each Gross Profit. So your GP totalling $12,200.00 If you are still using the same % mark up this year and sold the same amount of trophies and still used the same % mark up you will have made $10,000. $2,200 less than the year before.

IF YOUR DOING YOUR COSTING THIS WAY THEN YOU ARE IN “SERIOUS GOING BROKE FAST MODE” You have reduced your turnover of dollars probably by more than the end of year net profit you make. You have to increase your percentage mark up so that you make the same amount of dollars or there will be a mass exit of small businesses from the Trophy Industry (Good for the big Guys I guess and hey, how easy will it be to find experienced employees in the trophy Industry) 2/3’s of business today are experiencing cash flow problems. If your a 100% mark up’er then you have to mark up by 122% to real in the same dollars you were earning before.

How can you change the prices in your showroom to the correct amount without taking so much time which you haven’t got. Go in this Sunday and just add 20% to the price of every ticket. It may not be the most calculating method but it will at least be moving in the right direction. If you haven’t been keeping pace with the component price rises over the last couple of years You’ll need to increase by 25% to maintain your life style. If your not that happy with your dollar profit then maybe you should be adding 30% to the ticket price. Boy, sounds pretty scary hey.

HOW MUCH ARE YOU WORTH
After chatting away with some new System purchasers it has come to my attention that many people under sell themselves. I have asked the question - “How much do you charge when someone comes in to your store and wants just one standard engraving plate?” Most people have said $5.00. Hmm, well, on the surface that seems fair. But, hang on a sec, lets have a closer look. How much were you charging before GST. Most people said $5.00. I see John Howard is now your business partner and he takes 10%. How much did you get for 10% of your business when you sold it to him?

How long will it take to do the job (get a figure in your head now and let’s see if we agree).
First you spend 5 minutes in the showroom serving.
Then you spend 5 minutes engraving.
Then you spend 5 minutes at pick up time.

So forgetting the time lost in job interruption while serving the customer you spent 15 minutes on the job. $5.00 less GST = $4.54 x 4 15 minutes = $18.16 per hour for your troubles.

Now I know that this example is only a small part of the business and it’s a convenience service but it shows how the industry suffers from cold feet when it comes to charging the appropriate price for what they do. I would suggest you should be charging 3 times the price for the single plate. From my desk I hear you guys laughing at that comment but, hey, try it you’ll be amazed at the eye lids that don’t bat. And if you come up against Neville “I want it for nothing”. Explain the 5 minutes x 4 story (the 4 is the lease cost on the engraving machine). If he still isn’t happy. Tell him where the nearest opposition is and let them worry about driving an old Holden.

YOUR ALLOWED TO MAKE MONEY
You know how we use the old Mr Minute charges as justifications as to how it’s much better to come to your local trophy store to get your engraving. I went to Mr Minute for an engraving plate recently and he charged $19.00.

Now Mr Minute has Overheads, wages and the Directors make a lot of money. The Directors are supposed to make a lot of money otherwise they wouldn’t be investiging in their business. That’s whats supposed to happen. An easy way to fine tune your profit is to Get last years P/L and look at the profit you made then think of what you want in life such as Holiday House, Kids university, boat, whatever. Then think about the long nights you put in and the hard work you do and the excellent service you provide. Then decide how much profit you would have liked to have made last year (go on be over the top) and add the amount to your annual sales. Now work out the percentage difference and add that percentage to everything you sell. O.K. Here’s where most people chicken out and go bludering along the way they always have. O.K. whatever, but the ones that take the punt are usually the ones that realise their goals and make it all worthwhile.