Retail Math 101: Using Percents in Business
How to Calculate Percentage Amounts Without a POS System
The longer a person is out of school, the easier it is to forget how to use percentages and other basic business math formulas. In fact, it's not so much the time away from school as it is the time away from using the math formulas.
Computer programs, cash registers, good calculators, and point-of-sale (POS) systems can easily complete the percentage calculations for us. However, there will be moments when retailers need to process the numbers manually. Probably the place you will use it the most is at a trade show buying merchandise. Vendors will not provide you with the margins, just the pricing. You have to be able to calculate "on the fly" to ensure that you are getting a good deal.
Why It's Important to Know Basic Math
Many times in my retail store, you will find yourself needing to make a quick decision in front of a customer.
For example, how many times has a customer asked you for a "deal" on the price? If your store is like every other one, you get this question constantly. Being able to do the math in your head -- at least the simple percent increase formula and margin -- can ensure you do not give your profit away.
Often times, you will take the sale, but give away the profit. While cash flow is the most important element in running a retail store, you need to manage the urge to take any sale.
There are three parts to a percentage problem: rate, base, and percentage amount. The rate is the percent, the base is the total, and the percentage amount is a fraction of the amount.
Calculating Percentage Amount
To find the percentage amount, change the rate to a decimal and multiply by the base.
Percentage amount = Rate x Base
Example No. 1: What is a 25 percent discount on a $150 item?
Percentage amount = .25 x 150
Percentage amount = $37.50
Example No. 2: If your weekly salary is taxed at 30 percent, how much is deducted if you make $295 a week?
Percentage amount = .30 x 295
Percentage amount = $88.50
To find the rate, divide the base into the percentage amount. Because our rate is a percent, move the decimal two places to the right and add a percent sign.
Rate = Percentage amount ÷ Base
Example No. 1: 15 is what percent of 75?
Rate = 15 ÷ 75
Rate = .20 or 20 percent
Example No. 2: If you received a shipment from a vendor consisting of 250 widgets, but 65 were broken during transport, what percent are damaged?
Rate = 65 ÷ 250
Rate = .26 or 26 percent
To find the base, divide the rate into the percentage amount. Again, because the rate is a percent, move the decimal two places to the left and remove the percent sign.
Base = Percentage amount ÷ Rate
Example No. 1: $150 is 45 percent of what amount?
Base = 150 ÷ .45
Base = $333.33
Example No. 2: On Christmas Eve, your store sells a total of $2,500. It was 85 percent of the total sales for the year. What are your store's sales?
Base = 2,500 ÷ .85
Base = $2,941.17
Calculating Percentage Increase/Decrease
To find the percent up or down, find the difference between the two amounts first. Then divide that number by the first of the two amounts. Finally, convert the fraction to a percent by moving the decimal two places to the right and adding a percent sign.
Percent increase/decrease = Difference between two figures ÷ Previous figure
Percent increase/decrease = (This year - Last year) ÷ Last year
Percent increase/decrease = (Planned $ - Actual $) ÷ Planned $
Example No. 1: If Easter sales were $5,200 this year and last year they were $3,400, what was the percent increase?
Percent Increase = (5,200 - 3,400) ÷ 3400
Percent Increase = .529 or 52.9 percent
Example No. 2: If your store's sales for February were planned at $22,500 and actual sales were $18,000, what was the percent reduction?
Percent Decrease = (22,500 - 18,000) ÷ 22,500
Percent Decrease = .20 or 20 percent