Question
What is the difference between the terms "profit margin" versus "mark up"?
Answer
Generally I don't use the term mark up. A mark up implies you simply increase the amount you are charging for a product. I prefer the term profit margin because I build into that all my costs associated with that product. So if I'm looking at it from the standpoint of what is it going to cost me in order to provide hearing aids as part of an overall treatment plan, then I know I need to make a profit margin on that particular hearing aid of a certain dollar amount. If you look at a break-even analysis, if you have a profit margin of 65% you are going to break even a lot quicker than if you have a profit margin of 50%.
Granville Y. Brady, Jr., Au.D., F.A.A.A. earned his Au.D. from Arizona School of Health Sciences. He is a licensed audiologist and speech-language pathologist with offices in Clifton and East Brunswick, NJ. Dr. Brady teaches business development and accounting at A.T. Still University. In addition to his clinical experience, Dr. Brady has served as councilman and finance chairman for the Borough of Somerville, NJ and was responsible for the budget, insurance and retirement operations of the municipality. He serves as treasurer of the Audiology Foundation of America.
This Ask the Expert was taken from the recorded course, Managing Revenue Fluctuations - Guidelines for Avoiding Peaks and Valleys, course 15583. To register for the course, click here.
Granville Y. Brady, AuD Jr, FAAA
licensed audiologist and speech-language pathologist with offices in Clifton and East Brunswick, NJ
Granville Y. Brady, Jr., Au.D., F.A.A.A. earned his Au.D. from Arizona School of Health Sciences. He is a licensed audiologist and speech-language pathologist with offices in Clifton and East Brunswick, NJ. Dr. Brady teaches business development and accounting at A.T. Still University. In addition to his clinical experience, Dr. Brady has served as councilman and finance chairman for the Borough of Somerville, NJ and was responsible for the budget, insurance and retirement operations of the municipality. He serves as treasurer of the Audiology Foundation of America.
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