Hi guys,
A lot of people have been asking me how much they should mark campervans up by. Well the short answer is its up to you. You are your own business and are free to set your own markups. If you have concerns over that please have a look at my earlier post The Law and Price Maintenance
We do recomend a markup of at least 15%, though it is just that a recomendation. But what does a 15% markup mean? Does this mean Net x 1.15? Or does it mean Net divided by 0.85? And what about rounding?
Well I'd rather turn the question back and ask you what is the genral industry norm on the best way is to calculate markups?
I don't want to hear what rate you are marking up, thats up to you. But I would be curious to hear how you turn your rate into a sell rate?
Cheers,
- Curious Adam.
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27 comments:
Hi all!
Before I talk about how I arrive at a sell rate I would like to say that anyone in the market marking up less than 15% is mad. I mark up 20% and do very well, and this is in a market competing against all those idiots out there playing the ridiculous discount game.
Remember this: You won't win them all and you won't lose them all!
No one will ever, ever get every hire in Australia or NZ no matter how cheaply you try and sell. If you could get every hire by selling cheaply then that lunatic that was selling at nett but charging only a $50 booking fee should have put everyone out of business and become a millionaire. But he didn’t and he wont – ever.
So how does my business prosper marking up 20% when others are offering the same products at 15% or less?
Because people are happy with our website, how our business is presented and our customer service! They simply do not bother looking any further: if they did they would find someone else offering the same product at a lower rate and book with them instead. The fact that we get a great volume of bookings in the present discounted market is proof of this.
To those who are discounting (or marking up lowly) – do you think you get your current business volume only because you offer the cheapest rate out of everyone in the industry? Have you ever considered that you would have got the hire anyway, that your client was happy with your site, your business presentation and your customer service? But you only made 10% or less instead of 15% or even better, 20%!
There will always be those clients that are price driven; we all get them – sending the same enquiry to every agent that exists then doing the rounds trying to get everyone to better the rate. You discounters can have them, you can fight over the scraps – I don’t care. The clients that are service driven are pure gold and a lot less work! And believe me there are plenty of them out there.
To finish on the subject – have a look at Adams post regarding the 5/50 ratio, anyone that cannot grasp this most basic logic needs to go back to business school (if they ever went). If you want to work harder and not smarter go right ahead – you are not impacting on my business which, according to Adam, is top 5. And increasing annually by a healthy margin.
How do we arrive at a sell rate? Nett x 1.2.
Hi All
Basic accounting 101 - If you want 15% Margin divide Nett by .85 not x 1.15
Case in point if you are given a Backpacker Rate of $90 with 15% Margin then Nett is $76.5 if you divide by 0.85 you get back to 90 but if you multiply 76.5 x 1.15 = $87.975 so ~ 13.0% margin.
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