Understanding Profit Margins (And Why They Matter)
Revenue is exciting — but profit keeps you alive. Understanding your profit margins is key to pricing right and planning ahead.
1. Know Your Margins
There are three you should track:
- Gross Margin = Revenue – Cost of Goods Sold (COGS)
- Operating Margin = Gross Profit – Operating Expenses
- Net Margin = Net Profit / Revenue
2. Watch the Hidden Costs
Software subscriptions, shipping, payment fees — they add up fast and can erode margins.
3. Raise Prices Strategically
If your margins are razor-thin, consider:
- Tiered pricing
- Bundled offers
- Targeting higher-value customers
Make sure you communicate the value — not just the cost.
4. Benchmark Your Industry
Use industry data (via dulleschamber.org or trade groups) to compare. Are your margins healthy? Or are you underpricing?
Conclusion
Profit isn’t just what’s left over — it’s your oxygen. Know your margins and build from there.
👉 Download our Profit Margin Calculator to see exactly where your money’s going.
