Is your business leaving money on the table? You’re not alone—around 43% of small businesses in Australia report zero profit, often due to high operational costs and incorrect pricing. These challenges can reduce your potential revenue and make it hard to achieve profitability.
A key factor in addressing these financial issues is your sales margin. While it’s not the only cause of zero profit, understanding and improving your sales margin can give you a clear picture of how much profit you’re making after covering direct costs.
By managing both your expenses and your sales margin effectively, you can improve your business's financial health and set a path toward sustainable growth.
Example:
Gross Profit = $50,000 − $30,000 = $20,000
Example:
Example:
If you sell 1,000 units at $50 each, generating $50,000 in sales revenue, and your COGS (including all direct costs) is $30,000:
Gross Profit = $50,000 - $30,000 = $20,000
Sales Margin = ($20,000 / $50,000) x 100 = 40%
Important Note: Accurately calculating COGS is essential. Include all direct costs, such as discounts, allowances, materials, labor, and commissions.