A business selling more than one product or service line needs a fair way to split shared overhead — office rent, admin salaries, shared software — across everything it supports, rather than assuming every line carries an equal share. Common allocation methods By revenue share — each product absorbs overhead proportional to how much revenue … Read more
Pricing based only on product cost and a target margin, without folding in overhead, is one of the most common reasons a business can look profitable per sale and still struggle overall. A $10 product margin sounds great until you realize your rent, salaries, software licenses, and insurance are eating into it faster than your … Read more
There’s no single universal target, but a commonly cited general benchmark is keeping overhead under roughly 35% of revenue, with meaningful variation by industry and business model. Why the benchmark varies so much by industry Service businesses with minimal physical footprint (consultants, freelancers, digital agencies) may run well below 20% overhead since they don’t need … Read more
Not all overhead behaves the same way month to month, and knowing which category a cost falls into changes how you plan for and manage it. Fixed overhead Stays the same regardless of business activity — rent, insurance premiums, salaried staff. Predictable, but doesn’t shrink automatically during a slow month. Variable overhead Moves with business … Read more
Your overhead rate tells you how much indirect cost you’re carrying for every dollar of direct cost, and it’s the number that lets you fold overhead into pricing accurately instead of guessing. Without it, you can appear profitable on paper while your business hemorrhages money covering rent, insurance, salaries, and utilities. The formula Overhead rate … Read more
The same product often carries very different markup expectations depending on whether it’s being priced for a wholesale buyer or a direct retail customer. Understanding why prevents pricing either channel incorrectly. Wholesale markup Typically lower, since wholesale buyers purchase in volume and expect to apply their own markup before reselling. Wholesale pricing needs to cover … Read more
If you sell both wholesale and direct-to-consumer, your wholesale markup needs to leave enough room for your retail partners to mark the product up again and still sell at a competitive final price. Get this wrong, and you’ll either lose retail partners or watch your product sit unsold on shelves priced above what customers will … Read more
Profit percentage and margin percentage are often used interchangeably, but knowing exactly which calculation you’re looking at matters when comparing numbers across products or time periods. Understanding the difference between gross and net profit can reveal whether your business is truly profitable or just appearing so on the surface. The Calculation Profit percentage equals revenue … Read more
Bundling products together for a single price is a common e-commerce tactic, but calculating margin on a bundle isn’t as simple as averaging the individual product margins. When costs shift, discounts are applied, or inventory mix changes, bundle profitability can move in unexpected directions if you’re not calculating it correctly. Why simple averaging is fundamentally … Read more
As an e-commerce business moves past the early stage, margin tracking needs to account for costs that didn’t exist or were negligible at launch. The formula stays the same, but what belongs in the calculation grows. Understanding which costs matter most—and when—is what separates sustainable growth from the kind that looks good on a spreadsheet … Read more