How to Calculate Wholesaler Margin

A lumber wholesaler distributes lumber to smaller retail centers.

A wholesaler serves as the middleman between manufacturers, distributors and other wholesalers of products, and the retailers of those products. The wholesaler purchases bulk goods from a manufacturer, distributor or other wholesaler with the intent of selling large quantities to various retail centers. Calculating wholesaler margin is a simple process in theory; however lack of access to the wholesaler's books make it more difficult in practice. Calculate gross and net margin for wholesalers on your own, using a simple formula.

Instructions

1. Subtract cost of goods sold from revenue (sales) to calculate gross margin. Cost of goods sold includes the price paid for the inventory, freight, labor, tariffs and anything else paid to get the goods from the importer, manufacturer or distributor, to the wholesaler's place of storage.

2. Subtract cost of goods sold from revenue, and divide this number by the revenue. Multiply this decimal by 100 to express gross margin as a percentage.

3. Calculate net margin by subtracting cost of goods sold, operating expenses (such as rent, utilities and labor), interest and taxes from revenue (this difference shows net profit). Divide net profit by revenue, and multiply the decimal by 100 to express net margin as a percentage.

References

• University of Tennessee: Gross Margin
• Cornell: Gross Margin
• Purchasing Procurement Center: Cost of Goods Sold