Inventory Genius, Part Four (ep 111)Jan 31, 2023
Today is part four of my Inventory Genius series. In this episode, we're talking about margin. In your inventory based business, the gold is in the margin. The margin is what writes your paycheck.
What does margin really mean for your business?
Here's a quick equation for you:
Let's say Anne made $500,000 in her store last year.
She ran at a 45% margin which would have made her cost of goods sold $275,000.
$500,000 sales -$275,000 COGS = $225,000 gross margin
This means that in order for Anne to profit at all she'd need to keep her overall expenses for the year to $225,000 or less.
If her expenses for the year are $225,000 this would leave her with an overall $0 net profit.
NOW...let's talk about what happens if Anne increases her margin to 65%.
The same sales will produce drastically different results with an increased margin.
$500,000 sales - $175,000 COGS = $325,000 gross margin
If the cost of running her business was $225,000 again, she'd now have a profit of $100,000.
This is why I want you to become an inventory genius! You can learn to write yourself a paycheck. As you can see, at 15% difference in margin results in a huge change.
Here's what to do today:
See how much of an impact margin can make.
Take this equation, and on a sheet of paper, write down your numbers.
See what happens if you increase your numbers by 15%...I want to hear!
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Here's a glance at the episode:
[2:47] Let's talk about increasing margin.
[4:40] A situation to help you understand the numbers.
[8:30] Your bite-sized, actionable step for today!
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