In this episode of Five Minute Friday, we’re continuing our Know Your Numbers series by unpacking one of the most overlooked but critical metrics in retail: Initial Markup (IMU).

Your IMU isn’t just a pricing formula—it’s your profit ceiling. And if you’re not tracking it monthly, you could be limiting your growth without even realizing it.

🔑 Key Takeaways:

Understand the Role of IMU in Your Business

Learn how to calculate your current initial markup and why it determines your maximum potential profit before markdowns and discounts.

Discover how IMU directly impacts gross margin, operating expenses, and your end-of-year net profit.

Set Smarter Targets for Long-Term Profit

Use the formula: net profit goal + operating expenses + markdown % to determine your target IMU.

Compare your current markup against your ideal to identify the gap—and close it.

Price for Value, Not Just for Margin

Move beyond “cost x2” thinking and price based on what your customer is actually willing to pay.

Understand which product categories naturally carry higher markup—and lean into them.

Use IMU to Guide Buying and Vendor Strategy

Start conversations with vendors about MSRP and margin expectations.

Explore private label opportunities to maximize your profit ceiling and gain pricing control.

Bottom line: Pricing sets the stage for your success. When you understand and track your IMU, you don’t just protect your margins—you build a more profitable, sustainable business.

Tune in and raise your profit ceiling today.

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