Markup refers to the amount ($) added to the cost of goods sold (COGS) to cover overhead while also making a profit. In other terms, it is the difference between the cost of a good or service to the business owner or provider, and its selling price. Markup is most commonly calculated as a percentage and is used in businesses to determine pricing strategies and profitability.
Markup is an essential concept as it helps determine profit margins, set prices, and help with the overall financial health of your salon. Not to mention it’s also crucial for salon owners to strike a balance between setting prices high enough to cover your costs and generate profit while remaining competitive in the market.
What are the Benefits of Adding Markup?
Replenish your stock
Here at SalonScale, we recommend you markup your products 100%. This ensures you’re covering the product itself, while also giving you peace of mind that you can replenish this product and still make a profit on it, too.
Money to invest in yourself and/or your team
The profit generated from markup can be reinvested in the business for expansion, development, marketing and even staff incentives.
Covering unexpected expenses
Let markup be a cushion for unexpected costs. Maintaining a healthy markup percentage creates a buffer against unexpected increases in costs and unforeseen expenses while also providing a margin of safety for the salon.
What does SalonScale recommend for a markup?
As mentioned above, we recommend our users to do a 100% markup. Let’s take a look at how this can be broken down:
Let’s Take a Look at a Session With Markup and Without Markup👇
In the example above, the receipt total where markup was used is significantly higher than the receipt without. Without adding this percentage to your costs of goods sold, you’re unable to cover things like rent, utilities, gloves, foils, etc…
Should I Add Markup to My Products?
Markup simply allows businesses to cover expenses, generate profits, and sustain operations, while selling without adding a markup could lead to minimal profitability or potential losses, depending on other operational costs and factors.
It’s important for salons to carefully consider their pricing strategies and markup percentages to ensure competitiveness in the marking while generating a profit.