The figures people confuse.
REVENUE
Total sales value.
The number people quote and the least useful alone.
COST OF SALES
What the goods or delivery of the service cost you directly.
GROSS PROFIT
Revenue less cost of sales.
GROSS MARGIN
Gross profit as a percentage of revenue.
OVERHEADS
Costs not tied to a specific sale: rent, utilities, subscriptions, salaries.
NET PROFIT
Gross profit less overheads.
What the business actually made.
WHY THE DISTINCTION MATTERS
Revenue can grow while profit falls.
That happens constantly and is noticed late.
MARKUP AND MARGIN
Different. A fifty percent markup is a thirty-three percent margin.
Confusing them costs money.
WHAT TO TRACK
Gross margin by product or service, not just overall.
WHAT THAT REVEALS
Which things are worth selling.
WHAT TO REVIEW
Margin over time. A falling margin is the earliest warning of a pricing problem.
