Let's talk about profit margins
EPISODE 76
Notes
In this episode, we’re talking about profit margins. Now, I know what you may be thinking - attempting to understand margins is daunting and should be left up to the ‘numbers’ people. However, it’s crucial for business owners to understand the profitability of their businesses so that they can continue to grow and make well-informed decisions.
Today we’ll explore the three types of profit margins you should be become familiar with:
Gross margin: profit generated from core operations before deducting operating expenses
Operating margin: profit made from business operations after both direct costs and day-to-day running expenses
Net margin: the profitability of a business after accounting for all income and expenses.
I explain these in a way that is simple to understand by taking you through the components that make up these margins. I discuss the different costs within a business and how they’re categorised, so that you can understand which margin they relate to.
Though profit margins may seem confusing at first glance, calculating them is a straightforward process. I give you the simple calculations you need to find out the total of each margin, and explain how to refer to your profit and loss report to get to them. You’ll be surprised to find out how easy it actually is.
Tracking profit margins over time allows you to monitor the financial health of your business and reveal the true picture of where things are at. You'll be able to identify trends and patterns and make better data-driven decisions to optimise your processes.
I hope this episode gives you the clarity and confidence to gain a deeper understanding of your business's financial performance, and help you pave the way for future profitability and success.
LINKS:
https://www.accountantsdaily.com.au/australian-accounting-awards/winners/2023-winners-and-finalists
WHERE TO FIND ANNIE:
Instagram: @annie.gichuru
Website: https://anniegichuru.com/
Check out my course Bookkeeping it Real here!
About the
Author
Bec is a chartered accountant who worked at Australia’s big firms and banks for 15-years. Faced at a crossroads in her career, she backed herself, left her corporate job and launched Straight Up Bookkeeping. 3 years and 5 staff later, Straight Up Bookkeeping is one of Australia’s leading virtual bookkeeping businesses for creatives, with a mission to free business owners from financial stress so they can grow their empires.
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