It’s easy for small business owners to think sales/income is the key number you need to be focusing on. But actually the key figure is your Gross Profit figure (sales minus cost of sales) and your margin… the % difference between your income and your Gross Profit. You can have millions of dollars of sales and think you are doing well, but if your cost of sales is is nearly equal to a million dollars and your margin is being squeezed by high cost of sales… you could be in trouble. Finding ways to increase your margin… increase your prices/lower your cost of sales is a great way to increase your profitability.
How healthy is your margin?
From the desk of liber8yourbusiness. Small business mentors and experts in small business exit strategies. Based in Wellington, New Zealand.