18d (edited) • Finance Chat
Markup vs Margins 💸
A lot of nail techs follow this approach: You tally up your costs - rent, stock, disposables, wifi - then add 20-30% on top. It’s quick, it makes sense, and most importantly, it feels like profit.
But this kind of pricing is one of the biggest reasons why, at the end of the week, there’s less money in the bank than expected.
Here’s the issue: that 30% you’re adding isn’t your profit - it’s markup, and markup doesn’t tell you how much you’re keeping.
What’s the difference?
Let’s say you price a set at $104.
Your total costs to do the service come to $80 (including booking system, hourly rate, electricity, etc).
That leaves you with $24 in gross profit.
Markup -> $24 profit divided by $80 cost = 30%
Margin -> $24 profit divided by $108 revenue = 22.2%
That’s a 7.8% difference.
That 7.8% loss might seem small on each service, but spread across each service, over a year?
Let’s say you do a service that costs $80.
Then you add $24 profit.
Charge: $104
That’s 30% right?
Wrong.
That’s only 23%.
To get 30%,
You’d need to charge $114.30.
Here’s why…
Markup is the percentage you add to the service cost.
Margin is a percentage of the service price.
Always add margin, not markup.
Services add up.
That $10.30 mistake?
Over 980 sets = $10,094 lost.
Every. Single. Year.
(And then you add tax 😂)
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Markup vs Margins 💸
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