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Do you know where your profit comes from?
As a female business coach, I get quite shocked with how many people and Perth business owners that I speak to, have no idea what their gross profit is, let alone which clients and which products have the most gross profit in them.
If you don’t know what your gross profit margin is, or what gross profit is, it is your sales that you have invoiced, less the cost of goods sold (the cost of the products or services you’re delivering.) To work out the gross profit margin % you just need to divide the gross profit by the total sales for that period.
For example: sales of $100,000 less – $30,000/stock = gross profit of $70,000
$70,000 divided by $100,000 x100 = 30% (gross profit margin)
The real fun begins when you work out which products or services you deliver and have the highest gross profit margin. These two bit of knowledge can increase your bottom line dramatically.
1. Using this formula work out which products have the highest gross profit margin and you and all your staff can focus on increasing more of these sales.
2. Research which clients have the highest gross profit margin and concentrate on them and their industry the most. You will be amazed to see the difference.
I did this exercise with a a small Perth business owner and he found some clients had a 70% gross profit margin which others as little as 8%.
Some very useful information for you.