What profit margin is and why discounts without margin cause failure
Photo: Avila Ops Tecnologia
Profit margin is the share of price remaining after every sale cost: product, packaging, shipping, card fee, tax, and a portion of fixed costs. Sell for R$ 100 and spend R$ 70 delivering it: margin is R$ 30, or 30%.
Discounts reduce price, but margin pays. A 30% discount on a 30%-margin product eliminates profit. A 40% discount loses R$ 10 per unit; selling more loses more. October is the month for this calculation.
How do I calculate a product’s margin?
Photo: Avila Ops Tecnologia
Start with direct costs: product or materials, plus packaging. Add card fees, tax, and shipping you pay. Add a share of fixed costs such as rent and salaries divided by monthly orders.
A handmade candle sells for R$ 60. Wax, wick, jar: R$ 18. Box: R$ 4. Card fee 4%: R$ 2.40. Simples tax, say 6%: R$ 3.60. Fixed-cost share: R$ 8. Total R$ 36. Margin R$ 24, or 40%.
You can therefore discount 20% and keep R$ 12 per candle. At 40%, profit is zero.
Why do card fees change campaign calculations?
The fee is a percentage of the full price, while profit is what remains. If discounts reduce margin from 40% to 10%, a 4% fee becomes almost a third of remaining profit. That favors Pix in campaigns: immediate settlement and no fee on Avila Ops plans.
It also explains why kits and bundles work better than straight discounts: order value rises without cutting each item’s margin. See bundles and kits and Black Friday pricing.
What to do now
Calculate margins for ten bestsellers before deciding discounts. Missing separate spreadsheet costs are the first sign operations need a system. Describe the business for our diagnosis: avilaops.com/jornada or WhatsApp: wa.me/5517997811471.
Frequently asked questions
What is a good small-business margin?
No figure fits every industry. If little remains after everything, including your work, price is wrong or costs are high.
Are margin and markup the same?
No. Markup multiplies cost into price; margin is the remainder of price. R$ 50 cost sold at R$ 100 means 100% markup (multiplier 2) and 50% gross margin.
Can I discount on Black Friday?
Calculate product margins. If greater than the discount with card-fee room, yes. Otherwise offer free shipping or kits.
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