# Math for Salespeople: The Definitions

Here are a few terms I will be referring to in this series, and the book.

These definitions are not accounting definitions, but are mine as they address salespeople working everywhere.

• Cost
• FOB
• Landed Cost
• ROI
• Discounting
• Margin
• Markup
• Profit

## Cost

This term is used for the actual cost, or raw cost of a product. If a vendor quotes a price, that is the cost.

## FOB

This term is from the transport industry. It means Freight on Board, and indicates whether the vendor or the customer is paying the freight to get the product to a selling facility. FOB shipper requires the purchaser to pay the freight to have the merchandise delivered to the store. FOB delivered means the vendor is paying for the freight charges.

## Landed Cost

The Landed Cost consists of the raw cost of a product, plus the cost of shipping.

Item A = \$8.00
Shipping = \$2.00
Landed Cost = \$10.00

The Loaded cost of an item is more difficult to calculate. Some companies  add variable costs to the landed cost to arrive at loaded cost. The most common is a delivery expense added to the Landed Cost to get to the salesperson’s cost.

## ROI

ROI stands for Return on Investment. It is an accounting term that refers to to a profit percentage for the investment made.

## Discounting

Discounting is reducing the selling price of a product from the listed selling price. With a list price is \$10.00 and a selling price of \$8.00, this calculates as a 20% discount from the seller.

## Margin (Profit Margin)

This refers to the percentage above cost the product is sold for. With a cost of \$10.00 and a selling price of \$20.00, the margin is 50%.

## Markup

Markup is a way to determine selling price by applying a multiplier to cost to get a price. With a cost of \$10.00 and a markup (multiplier) of 2.0, the selling price is \$20.00

## Profits

Profits are the most important factor to both the business owner and the commissioned salesperson. This is the difference between the selling price minus the loaded cost. A \$20.00 sale with a \$10.00 cost calculates to a \$10.00 profit. (gross profit, but that’s for later).

That is my quick primer for the terms used in this book. If you have questions or comments, please don’t be shy. Ask.