eCommerce Businesses: Gross Margins Can Make Or Break Your Business
Gross profit margin is a key metric for eCommerce business owners to manage.
Do you know your gross profit margin per product, sales channel and customer?
This can make or break your business.
Unfortunately, I know most of you will not have these key KPI’s integrated into your accounting and financial system.
Gross profit margin is critical because it immediately gives you an overview of how your current revenue is impacting the rest of your business, and whether it is doing so at a profit or a loss.
This has a far-reaching impact on your strategic and tactical options for how to run your business.
Yes, revenue matters but it is not what you make that matters it is what you keep.
Gross margin should not be confused with net margin which includes your overhead costs.
Gross margin tells you whether your e-commerce store is making a profit on each product that you sell.
Now, if you make a gross profit on each product, but you have a negative net profit, that means that the overhead and marketing costs are too high.
That also means that if you scale your revenue and your customer base, your overhead costs would grow less and you would grow into profitability.
What does it matter to have a business doing $1M, $5M or $10M if you have razor thin profit margins?
If you’re ready to take the next step in scaling your eCommerce business, book your 1-on-1 meeting with me TODAY!
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Consider the below example:
Monthly Revenue: $100,000
Gross Profit Margin: 15%
Gross Profit: $15,000
Monthly Revenue: $30,000
Gross Profit Margin: 50%
Gross Profit: $15,000
In this example Company A and Company B make the same profit but Company B does so with only 30% of the revenue of Company A.
👇 I recorded a video going over this below
The key is first understanding and monitoring your gross profit per product, sales channel and customers.
Then you can take this data and benchmark it against your industry.
Finally, we can focus on strategies to improve this significantly.
We’re here to partner with you to take your company to the next level!
If you’re ready to take the next step, book your 1-on-1 meeting with me TODAY!
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