Do you know what Profit Margin is?
Simply put, profit margin is the percentage added to the cost of a product. It should not be confused with gross margin, which is the difference between revenue and production costs of goods sold and/or services provided.
The higher the profit margin percentage, the higher the profitability instagram database the product. If the profit margin of your coffee products is low, you may be missing out on opportunities! On the other hand, if the profit margin is negative, you need to reassess your production costs to avoid short- and long-term losses. If you need financial help to set up or improve your café, check out our article on support for opening a café in Portugal.
It is very important to know what the profit margin is, especially to determine the most advantageous price for each product. Understanding the dynamics of the profit margin also allows you to identify whether the price of the products is in line with the market average and adjust if it is not. Check out our innovative ideas for cafes!
How to Calculate the Profit Margin of a Coffee?
To obtain the profit margin of a coffee, you only need to use the following calculation formula:
Profit margin = (selling price – cost of production) / (selling price x 100)
Profit Margin Calculation
Gross Profit Margin vs. Net Profit Margin
The calculation we present refers to the gross profit margin, which only includes the profit on the purchase value from the supplier.
The net profit margin takes into account other costs, namely operational and administrative costs of the café, such as taxes, space rental, electricity, water, internet, employee costs, among others. The calculation of the net profit margin uses the total sales, minus all operational costs, as a base value.
