How to Work Out the Real Margin on a Watch

How to work out the real margin on a watchSale price minus purchase price is not your margin. A watch absorbs money between buying and selling — service, polishing, parts, freight both ways, insurance, listing and merchant fees — and in Australia the GST on the sale is not yours to count. Real margin is the sale price, less GST, less what you paid, less every cost the piece actually incurred. On a serviced watch the difference between the two numbers is routinely the whole profit.Service and repairThe largest hidden cost on a pre-owned piece, and the one most often remembered as an estimate rather than looked up. A full service on an in-house movement is a four-figure sum, and it is spent before the watch is listed.Polishing and refinishingCheap per piece, applied to almost everything, and almost never recorded against the individual watch. It disappears into a monthly invoice from the polisher and never reaches the margin on the piece it was spent on.Freight and insuranceBoth directions. To the watchmaker and back, to the buyer, and sometimes back again. Insured freight on a high-value watch is not a rounding error, and a return pays it twice.Platform and merchant feesMarketplace commission, card surcharge, payment-processor percentage. These scale with the sale price, so they are largest exactly where you assumed the margin was healthiest.If you are registered, the GST component of the sale is collected on behalf of the ATO. Counting it as revenue inflates every margin figure you look at by an eleventh of the sale price. Record it separately from the start.Time on the shelfNot a line item, but real: capital tied up in a watch that has not moved in 200 days is capital not buying the next one. Days held is the cost that does not appear on any invoice.

Sale price: $12,000 — the number that usually gets called the result

Less GST on the sale: the sale component remitted, not kept

Less purchase price: $8,000 — the only cost most spreadsheets subtract

Less service: $900

Less polishing: $150

Less freight both ways, insured: $120

Less merchant and platform fees on $12,000

The naive answer is $4,000. The real one is well under $3,000, before any allowance for 200 days of held capital.

Attach every cost to the watch, the day it happensA polishing invoice covering eleven watches is eleven costs, not one overhead. Split it at the time; nobody reconstructs it at year end.Keep GST out of revenue from the startRecording tax-inclusive figures and correcting later means every margin you look at in between is wrong by the same amount, in the flattering direction.Measure margin per piece, then per brandAggregate profit hides the pattern. Margin per brand tells you which stock is actually worth buying again, and it is usually not the brand that feels busiest.Track days held next to marginA 25% margin in three weeks and a 25% margin in eleven months are not the same business. Looking at them together is what stops you repeating the slow one.Why sale price minus purchase price flatters every number you look at, which costs to attach to the piece, and how GST fits in.The short answerWhat a watch absorbs between buying and sellingSix costs. Most spreadsheets subtract one of them.A worked exampleRound numbers, chosen to be clear rather than typical. Your figures will differ; the shape will not.Four habits that keep the number honestStill tracking all this in a spreadsheet?The costs above are exactly the ones that go missing between columns.See the margin after every costTrue cost per watch across service, polishing, parts, freight and fees, with GST handled separately, and margin by brand and days held. $99 per month AUD, 14-day free trial, no credit card required.