Gross Margin is Everything!Oct 24, 2022
I'm going to show you how important your gross margin is in an inventory-based business.
If we have $10,000 in sales and the cost of goods sold on those sales is $5,000, this leaves us with a gross margin of $5,000.
Now, let's now say it costs us $5,000 to run our business. This leaves us with a net profit of $0.
Here's how we can shift that:
If we make those same $10,000 in sales but we lower our cost of goods to $4,000, our gross margin is $6,000.
It still costs us $5,000 to run our business, but at the end of the day, we have $1,000 in our pocket.
The lower cost of goods sold directly corresponds to the higher margin.
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