Understanding profit, margins, and financial decisions
In every Apprentice boardroom, Lord Sugar eventually gets to the numbers. Revenue, costs, profit margin — and inevitably, someone doesn't know them. It's often the moment that seals their fate.
"What's the margin on that? ... You don't know? Well that's just basic business, isn't it?"
A team once proudly announced they'd made £2,000 in sales. Lord Sugar asked about costs. After mumbled calculations, it turned out they'd spent £2,100. They'd actually lost £100 — and hadn't realised until the boardroom.
You don't need to be an accountant, but you DO need to understand:
Today we make numbers your friend, not your enemy.
Before we calculate, let's make sure we're speaking the same language.
Total money coming in from sales
Total money going out
What's left after paying costs
👆 Click to see: Fixed vs Variable Costs
| Fixed Costs | Variable Costs |
|---|---|
| Stay the same regardless of sales | Change based on how much you sell |
| Rent, salaries, insurance | Raw materials, packaging, shipping |
| You pay even if you sell nothing | More sales = more cost |
A food stall sells 50 sandwiches at £5 each. Ingredients cost £100, and the market fee is £50. What's the profit?
In your work or daily life, where do you see the difference between revenue and profit? Can you think of a business with high revenue but low profit?
Margin is Lord Sugar's favourite word. It tells you how much of each sale is actually profit — and it's the key to sustainable business.
What percentage of revenue is profit?
These are often confused — and getting them wrong can be costly!
Markup = how much you add to the cost
Margin = what percentage of the price is profit
A 50% markup does NOT give you a 50% margin! If you buy something for £10 and add 50%, you sell for £15. But the profit (£5) is only 33% of the selling price. Apprentice candidates make this mistake constantly.
You buy products for £20 and sell them for £30. What's your profit margin?
| Industry | Typical Margin |
|---|---|
| Supermarkets | 2-5% |
| Restaurants | 3-9% |
| Retail clothing | 4-13% |
| Software/Tech | 20-40% |
| Luxury goods | 30-60% |
Why do you think supermarkets have such low margins but tech companies have high ones? What does this mean for business strategy?
In The Apprentice boardroom, Lord Sugar reads out the numbers and expects you to understand them instantly. Let's practise.
Two teams ran food trucks for a day. Here are the results:
Which team performed better, and why?
Looking at Team Beta's numbers: What went wrong? If you were their PM, what would you have done differently? Discuss with your teacher.
Time to do some calculations yourself. Work through these scenarios — use a calculator if you need to!
Your team sold 80 handmade candles at £15 each. Each candle costs £4 to make. You spent £200 on the market stall and £50 on packaging.
Calculate:
👆 Click to check your answers
1. Revenue: 80 × £15 = £1,200
2. Costs: (80 × £4) + £200 + £50 = £320 + £250 = £570
3. Profit: £1,200 − £570 = £630
4. Margin: (£630 ÷ £1,200) × 100 = 52.5%
That's a great margin! Lord Sugar would be pleased.
You're launching a new product. It costs £8 to produce. Lord Sugar wants at least a 40% profit margin. What's the minimum price you can charge?
👆 Click to see the solution
Working backwards from margin:
If margin = 40%, then cost = 60% of price
So: £8 = 60% of price
Price = £8 ÷ 0.60 = £13.33
Check: (£13.33 − £8) ÷ £13.33 = 40% ✓
Walk through your calculations out loud. Where did you struggle? What tricks help you remember the formulas?
It's boardroom time. Your teacher will grill you on a business scenario — can you answer Lord Sugar's questions confidently?
Your team ran a one-day event selling gourmet burgers. You have 2 minutes to review the numbers, then your teacher (as Lord Sugar) will ask you questions. Be ready to explain and defend the numbers!
Your teacher will now ask you these questions (and maybe harder ones!). Answer confidently, know your numbers, and be ready to justify your decisions.
You can now calculate profit, understand margins, and defend your numbers in the boardroom. These skills are essential for any business conversation.
Key Takeaway: Revenue is vanity, profit is sanity, cash is reality. Always know your margins!
Next Lesson: The Branding Challenge — creating identity and positioning in the market.