Tips for how to price your products

Dear FSB: My company sells windows and doors. How can I calculate the markup I should have our salesmen aim for when pricing a job? Is there a formula you can use to calculate your gross profit?

- Linda Diaz, San Juan Capistrano, Calif.

Dear Linda: As a matter of accounting, businesses determine their gross profit by taking taking the total revenue they generate from selling a product and subtracting the cost of making that product (sometimes referred to as the "cost of goods"). Gross profit is often expressed as a percentage, which you arrive at by dividing your gross profit by your total sales. You can determine your company's net profit by taking the gross profit and subtracting your total expenses from that figure.

That said, there's no simple formula that will tell you what markup you should put on the products you sell. In fact, what you can charge for your goods may vary greatly depending on the region where you do business, the competition you face and the state of the overall economy. But be careful: finding the right price to charge for the goods and services your company sells could be the difference between success and financial ruin.