How Should You Be Pricing Your Products?

Ask the Accountant…

Question: I am new to the business and don’t know how to price the items I am selling. Any tips?

Answer: In general terms, you would like your gross profit percentage to be around 40 percent and higher would be better.

Your gross profit margin is the amount left over after you pay the supplier. For instance, if you sell an item for $100 and you owe the supplier $60, your gross profit margin is $40, or $100 - $60. The gross profit percentage in this instance is 40 percent ($40 profit, $100 selling price).

Mostly, the prices quoted by the suppliers are coded so you see the list price that can be shown to your customer. The code allows you to calculate the percentage of that list price due to the supplier or the net price. Be careful with that. Sometimes suppliers do not have a coded list price and might only quote the net price that you owe them, which can be a costly error.

Paying close attention to your net cost from the supplier and pricing the items correctly for your customer is a critical step that deserves your full attention to grow your business in a profitable way.

Please email your questions to Harriet at Ask The Accountant.

QuickBooks Premier and Enterprise can be modified to better serve ad specialty distributors. Harriet Gatter is a QuickBooks ProAdvisor, a former accounting professor and a former ad specialty distributor. She advises ad specialty distributors to use QuickBooks Premier and Enterprise, often in conjunction with other industry-specific software, to manage the complexities of the ad specialty business, with the results being time saved, errors eliminated and an overall accurate accounting of your business. Contact her at hgatter@accountingsupportllc.com.