What is a reasonable profit margin for any business?

[Etini]

The ultimate aim of any business is to maximize profit. When we say maximize, we have to know that there is a thin line between maximizing profit and exploiting people. We know business people are naturally capitalistic. But we need to have limits on how we fix prices and maximize profit.

I sell chickens. In my business, I use about 1400NGN to raise one bird from day-old to maturity. I sell at 1800NGN and make a profit of just 400NGN. That is just less than a dollar, but if you spread it around many chickens, you realize I have made huge profits.

I think every business person should fix a price that should not be more than 30% of the total cost of production. Beyond that, I think you are exploiting people. Some people want to recoup everything and would end up fixing prices that are not favorable to the customers.

 

[Mika]

When you are just starting, a 10 percent profit margin is good. If you are established you can add a 20-25 percent profit margin. This is my favorite pricing strategy that has always worked for me. When you are new, people will not trust you, you can attract buyers only by offering your products for cheap. When people find your products are cheap, they are willing to try your products. When you have a small profit margin, your product will be cheaper than your competitors. The idea is to sell more products for lesser profits. IN doing so, you will buy sales and reviews. Once you have managed to build loyal buyers and when you have a lot of positive reviews, you can increase your profit margin to 20-25 percent. Since you have positive reviews, and you also have loyal buyers, you will have buyers who continuously buy from you as well as new buyers.