Okay, everybody. We're now going to get some terminology

down, some language and in particular, we're going to talk about margins and

markups and how those are different and how they are used in practice.

Margins occur across the distribution channels.

So everybody in business basically tries to make a margin, right?

All that means is you're selling it for more than you are buying it or

making it for, right?

So that's the goal of a lot of businesses.

So, to have a positive margin is a good thing,

what we need to be very careful about is how we use the terminology

to make sure that when we're talking to other business people,

we use the language that they understand and that they can interpret correctly.

So, what is a margin?

Margin is just the selling price minus the class to produce, right?

So that's the basic formula, and remember cause to produce

could be the manufacturer who's actually making the item.

The cost to produce an item for

a retailer is just the amount that they're buying it for, right?

Whatever is the cost it is to get them that good in the door.

It's often expressed as a percent as well.

So the selling price,

think about that is 100%, that's 100% of the cost to consumers.

And then you subtract out the cost which is equal to

either the manufacturing cost or the cost to buy it.

And then that's the margin, the percent margin for that particular business.

So, imagine your selling price is $100 and

your cost to produce is $75, what's the margin?

I bet you all get this, it's just 100- 75 = $25 and that's your margin.

Everybody I know, I have a daughter in the second grade and

this the kind of math I would do with her at home.

So I know you're not in second grade and you can do that subtraction.

The key here is not the math, it's to make sure the terminology is correct.

And that is a margin or a dollar or what we sometimes call a dollar margin, okay.