Financial Service Highlight | Markups, Margins, and Math

One service we provide on the Financial Services side of the business is preparing and sending monthly financial reports to our clients. Many times, especially with new clients, we set up calls to walk designers through their reports and really help them understand their numbers. One question that comes up often when working with new clients:

“I always mark my product up 20%, why aren’t my margins 20%?”

This is one of the rare times in life when you have to go back to middle school math and dust off that formula you learned to calculate percentage change. Here is a simple example of how to compute percentage change (which is basis for determining product margin percentage):

• Designer buys table - $1,000

• Designer marks table up - 20%

• Designer sells table to client - $1,200 ($1,000*20% + $1,000)

• Designer margin (profit) on product - $200 ($1,200 - $1,000)

• Designer margin (profit) % - 16.67% ($200/$1,200)

Although the mark up is 20%, the margin on the product is 16.67%. In fact, to achieve a 20% margin on your product sales, your markup must be 25%.

While this may make your eyes glaze over, this is exactly the space where the Financial Services team at The Dove Agency thrives!

We break down complex aspects of your business and help you digest them in manageable chunks. The powerful reporting tools available in DesignDocs, an integrated project management and accounting software supported by The Dove Agency, make this much easier for us and our clients.

DesignDocs provides margin reports at the company level, the project level, and even the item level. With a few clicks, you can tell where you stand financially from every aspect of your business.

Whether you use DesignDocs, another software product, or simple spreadsheets to track your project activity, we recommend reviewing your margins monthly. Checking in on how your projects are performing on a regular basis allows you to stay on track and avoid unpleasant surprises at the end of a job.