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Gross profit margin

Discussion in 'The Taxidermy Industry' started by Mossyback, Feb 13, 2013.

  1. That is correct, although I've never heard it called contribution margin.

    Gab, thank you.
     
  2. Old Fart

    Old Fart Active Member

    Gross profit vs net profit? When I used to be in retail building materials, we figured our "gross" profit based only on our cost of the product. Never was labor and overhead figured in. The money left over, after ALL the rest were calculated and paid, was the "net" profit.

    The "fixed" expenses, like the ones Mossyback lists.....plus your labor...... can and SHOULD be calculated on a "per hour" basis.
     

  3. boarhunter67

    boarhunter67 Well-Known Member

    That's basically what I was saying. Your labor is your net profit.
     
  4. selling building supplies are not the same as taxidermy sales. Yes you would consider your labor an expense. If you were building a house with that building material, your labor would be added into your cost of goods (COG) if you have a high school kid in your shop helping with clean up and restocking then that is an expense. If you have people putting mounts together @$15 per hr, that is added in the COG. You use these formulas to figure how much you can pay your self. Not just "oh well, I get what's left over" if you need $15.00 per hr for actually doing the taxidermy but you numbers won't sustain that kind of pay then you need to look at lowering cost, lowering expenses, or raising prices. What's left after expenses is your net profit and you can take that as money you draw for running a business. Not as a paid taxidermist.


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  5. boarhunter67

    boarhunter67 Well-Known Member

    In that case my gross profit is zero since my labor is what I make. Unless you figure in a specific rate per hour and base your prices specifically on hours you calculated the previous year to compete each type of mount, it's arbitary.
     
  6. You would be on the other side of the industry standard. If you don't figure your labor into your cost of goods Then you're gross profit margin would be in the mid 80% range Instead of being in the low 50% range. I actually run my books the same way you do however in order to make a good business decision I do have to calculate in labor into my cost of goods. If we don't calculate labor into our cost of goods then we are being reactive to any business decisions we need to make instead of being proactive and understanding where the changes need to take place. However after talking on the phone with a couple other shops it looks like most taxidermy businesses have a gross profit margin of about 50%.


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  7. Mine seems to average around 45%. I'd be interested to know how these numbers stack up against other businesses. Is there a "standard" GPM businesses should strive for?
     
  8. chris, that is a great question and one I am trying to find the answer to. I think If your between 45% to 55% then that is the industry standard. But my elk will be as low 38% GPM and I charge $1050. Now I now this will vary greatly by the cost of materials. My elk material cost is 32% higher then my deer and the elk price is 62% higher then what I charge for deer. But my labor cost is 73% higher on my elk. So I need to look closely at what I'm doing with my elk and try to get a more realistic labor cost. After all, I'm kind of estimating since I haven't truly watched the time it takes to put one together from start to finish.


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  9. I had a few that dropped into the 30% range too. I'm not sure what this number is used for either. The best I can figure is that you can use it to see what jobs will produce the most profit with the least initial costs. My overhead and labor rate stay the same through all jobs, so I and the company are still making the same dollar amount per hour weather we are working on rabbits or rhinos, actually I've done neither of those, :) So I'm interested to see how this number plays into selling a business. I'm gonna have to do a little researching when I get a chance. Studying up on some other things right now.

    I read this before I posted and remember a post you had made earlier, and I guess I see where this can help you determine where to try to cut costs too. That and tell you where you should try to improve efficiency and get the lead out, lol.
     
  10. I don't understand why you would figure in paying your self labor for a gross profit. I would understand it if you were paying someone
     
  11. I have to run to Portland OR for an emergency so I'll get back with you on this.
     
  12. I'll be waiting, I'm not busting on ya just curious, I have no idea about accounting and figuring these numbers for the business and why
     
  13. Old Fart

    Old Fart Active Member

    Mossyback, you are correct, any retail business is not the same as a service oriented business, like taxidermy, but you can figure the gross and net profits the same. As I stated our "gross" was figured on the COST of the materials. Labor(wages, salaries,etc.) were not used to determine our gross margin. Of course it's necessary to use those numbers in the calculation of net profit, they ARE expenses. My point was.....very few here know that there is a difference. Wages that you pay yourself and profit are NOT the same thing. Profit is what's left after all the expenses and wages are paid. I suspect that most taxidermists would be making NO profit and FAR LESS in wages than they think, if they broke everything down correctly!

    Also our gross margin varied with the product, depending how much inventory had to be maintained and for how long is was there. For a taxidermist the obvious expenses that are short term are forms and commercial tanning. Long term inventory are things like glue, wire, resins, foams, those items should carry a higher gross margin than the short term inventory. Gross on short term items was figured at around 50%, but long term items was FAR higher. Our net was generally figured to be "good" if it ended at 8% and ''very good" if it ended at 12% or more. The more times we "turned" an inventory, the higher the net profit.

    boarhunter67, your "net" profit is ZERO. You are paying your self a wage out of your "gross" profit.
     
  14. For me it is about how much an hour I make. All expenses and materials, subtracted from what I take in, divided by the time it took me to do the mounts, gives me a per hour value. I do this at tax time when I have a years worth of numbers, but I do it at the end of each month and add it all together at the end of the year to make it easier to add up.
    I have a form that goes with all my mounts so I can keep track of my time on each mount, but do keep a log book of time spent on the phone, ordering and cleaning.
    Hidden expenses and lost time is what screws everything up for people.
    For 2012 I was at $ 26.78 per hour, in my pocket. If I was not doing Taxidermy, I would have a job that payed by the hour, so that is what is important to me.
     
  15. boarhunter67

    boarhunter67 Well-Known Member

    Jake, that's how I figure it. It's about how much I want to make an hour/week/month/ or even job.
     
  16. boarhunter67

    boarhunter67 Well-Known Member

    Our PG&E bill has been over $500 a month the last three months. We have a 1700 sq. ft. house and keep the heater at 62 at night and 55 in the day. We try not to leave things on. I could say I make $X on deer heads, but if I'm not factoring in electricity and all other costs to produce it, it doesn't mean squat. That's why I laugh when someone comes on here and says they charge $250 and anyone charging over $300 is ripping people off. Some of you remember the thread I'm talking about. You can say you make a profit on a $300 deer, but you're deluding yourself on the amount if any. Not saying that about anyone who's commented on this thread. I'm just saying profit must include total charged minus TOTAL cost. Anything else is meaningless.
     
  17. I don't disagree with what you guys are saying, but he wants to know what a mount contributes to covering fixed costs. Do you need to inlclude utilities when figuring how much you really make? Of course. Here's the problem. If you do 15 deer in a month or 20, you've probably got pretty close to the same utility bill. How much does each mount contribute to the costs that are already there? It's exactly how you would do it if you were trying to figure out a break even point.
     
  18. coues_deer

    coues_deer New Member

    145
    0
    USA
    Gross Profit margin does not really apply to taxidermy as it is more suited for retail sales. As an accountant this method does not really tell you much information wise for the average taxidermist (although many use this method for their net income and are fooling themselves by not taking into account all of the other costs).
    Taxidermists are basically manufacturers and should be using the Cost of Goods Manufactured (COGM) and not the Cost of Goods Sold (COGS). The main difference between the 2 models is the COGM incorporates labor and overhead in the cost per unit (ie deer head, fish etc). Using the COGS model in a service industry does not tell you much.
    The COGM model is used the produce an item where the COGS model is used to "sell" an item if that makes sense.
    In a nutshell the COGM model includes:
    materials (both direct and indirect)
    labor (all labor except sales/overhead labor which most studios do not have except for hunting shows etc)
    overhead costs (utilities etc)

    to arrive at a total cost per unit completed, then you can use this number to to calculate a COGS number for "selling the mount"

    Labor costs in taxidermy average 20% of the total price. The Labor in most shops is what they consider their profit. Most do not have a profit "margin" built in to their pricing.

    On a positive note Mossyback thank you for crunching the numbers, most taxi's use the COGS and think they are making money. I always tell folks to ask the wife what the profit margin is, you will get a totally different answer than you would from the "taxidermist" (no offense to the female taxi's)
     
  19. I am not sure if you consider yourself an artist or not, but I think you are grossly under paying yourself. 9 to 16 dollars and hour is terrible. You should be charging a lot more. My costs for materials are about $150. This includes mark up. On average it takes me 7 hrs to complete a deer head for $500. That results in $50 per hr. now I wish I could charge more but I already the most expensive in my area. When you calcate your gross profit you need to account for overhead or you will make nothing. I am lucky I run an archery business in these building so the overhead is not totally dependent on my taxidermy but I calculated my expenses run about $20 per mount. So even if this is true I still make a reasonable hourly wage. Just my thoughts. Good luck. Brian.
     
  20. Accounting for overhead will get you the net profit, not gross profit. This net profit is not what you make. It is what the business makes. As soon as you pay yourself what is left over, it becomes overhead and would render your net profit $0. Profit is not what you make, it is what the business makes. Wage, salary, labor, that is what you make. If you pay yourself all the profit, thus turning it into a wage, who or what pays for a new machine or tool if it breaks? How does the business expand?

    coues_deer, you mention some terms that most taxidermist have no clue about or how to figure them. I have a profit margin in my price, and my labor is also divided into an hourly wage and overhead salary. Hourly wage is paid for time directly spent to complete each individual piece. That is every minute spent on that piece from the time they step foot in the door to the time they leave with their mount. Overhead salary is paid to me for time spent at the convention, advertising at different places, talking on the phone to people that don't bring the animal to me, office work, and get ready for it... Holidays, Sick Days, Personal Time and Vacation. How many taxidermist get a paid vacation? I do!

    This is why these conversations end up going downhill. Most taxidermist would throw a fit if they worked somewhere else and their boss/company treated them like they are treating themselves. The problem is they don't, can't or don't want to see what they are doing.