What is the typical markup a paint store will expect?
We make a special clear metal coating. It has sold mostly through word of mouth and by online natural SEO. We have about 15 paint stores and artist supply stores that carry the product. I want to increase that number by about 100. The plan is to use a small inside sales team to pitch the value proposition to select paint retailers and artist supply houses. Most will be single location or 2-5 locations and near all will be privately owned.
Hi Jack. If your clear metal coating has a unique niche, then you should be able to extract a premium price for your product. If you have lots of competitors then you would have to consider their price range when setting your prices. Since you already have stores that carry your product, then look at the price they are selling to the public and then the cost you charge them and that gives you the margin. Margin calculation = (sell price-cost)/sell price. Do you like the answer? Can you charge more, or should you cut costs. Ultimately you want to make a good enough profit that you can expand your business and add new products. Hope this answer is helpful.
As said by Christopher Paint definitely can generate higher Gross Margin in the entire value chain of a store till it reaches the end customer.
However,instead of giving a static markup I want you to consider the following aspects if possible to arrive your own markup , tentative expected realistic Gross Margin for your expanded business operations (As-Is-Before Expansion Vs To-Be-Post Expansion) .
You can work out your expected Gross Margin from the expected planned Sales,COGS including increased Overheads,Cost of financing(if any),depreciation,taxes & any one timers,approvals,increased SG&A costs,typical competition value proposition in the similar segments that are currently operating in those planned locations(2-5) that you are planning to expand your operations & any big retail chains operating & offering similar or better value proposition to its customers in the value chain in terms of lower markups,discounts,credits,better payment terms etc ,and other potential risks in the targeted areas or location targeted for expansion.
With some of the points mentioned above I am sure will help you decide your breakeven for the expanded operations considering your current Gross Margin numbers.(Your own operations historic average Gross Margin for the existing operations can be a realistic way to start for computation).Once you have reduced your overheads & other Non-Value Added costs in your entire Value stream I am sure you will have opportunity to make your GM to as high as your customers are willing to pay.So in simple consider your existing operational efficiency as GM margin or even the best Quarterly performance of your own existing business as an "Entitlement-Markup" that you can target.
Once again paint is a really high margin business but its mark up is decided by your own customer groups/markets in which you are operating. Just a thought.
Paint markups are very high. When I worked briefly at a big chain building supply store, paint was their favorite thing to sell because it had the best gain on profit over any other product in the store. I used to talk to old hardware store owners and they confirmed the same thing. Expect an average of 25%+ markup in the store, although some figures can be higher.