Is it bad to consider a profit margin on the first year of a launch?


I am building my product catalog with prices for my print company but I realized that I cannot accurately calculate my profit margin because I have no net sales or revenue yet. So I was curious to know is it a bad plan to not include a profit margin? I did plan to factor in my desired revenue for the first year as an expense. Is it a bad to factor in revenue as an expense? Is it a bad idea to not include a profit margin on a technically non-existent company?

Pricing Products Business Model Business Plan

asked Jun 5 '13 at 04:25
Matt 2.0
188 points
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3 Answers


It is possible to do both ... input in a profit margin (to account for risks, changes, variability etc) but have a separate budget line which is promotional sales discount which can be blanket the first year then perhaps more targeted the next.

The larger question seems to be skipped which is why are you in business. As Drucker says, unless a firm makes back at least its cost of capital, it is a net detriment to the economy. The dot.con boom bust had many examples of companies selling a dollar for 90cents (which as any Pozni knows, comes to a shuddering halt due to laws to thermodynamics). Profit can be viewed in several ways, one is the accounting equation where the (revenue-expenses) gets assigned to either capital (retained earnings) or dividends (expense). Some economists take the view that in a purely competitive market, it is the reward for risk taking.

So to create value, you have to either increase income whilst constraining costs (aka scalability or increasing returns), organise yourself to take advantage of shrinking costs (eg Intel wrt Moore's curve) or be prepared to take a risk (eg new disruptive tech). And the value is measured from the point of view of socio-economic benefits to your customer, of which a portion is captured in the (hopefully increasing) gap between revenue/expenses.

I'd also point out that some people believe in a triple bottom line, that social impact also counts. These are formed into community interest corporations or low-profit limited liability, even coops where the profits go back into discounts for members. So I encourage you to think about what business you are in as compared to what job you are doing.

answered Jun 7 '13 at 03:07
501 points


I'd definitely calculate prices to reflect a mark-up, but I've heard of very few start-ups that generate profits in their first year.

answered Oct 6 '13 at 08:19
City Entrepreneur
42 points


Yes, you should definitely include profit margin. As Erik Ries says you should start charging from day 1.
My advice is to evaluate what is the cost per unit them look what your competitors do and if possible go below them in the price tags. This way you have:

a) profit and by that normally functional business

b) better price proposition that your competitors

If it's not possible to go below their prices them you should think about suitable way to market so you can sell your products as more premium or with better quality. You understand where I'm going. And if this prices don't work for you always contact me and I'll try to help you figure out a way make them work.

Hope this is helpful to you.


answered Jun 8 '13 at 04:04
Nikolay Todorov
1 point

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