Do you know what your gross profit margin is? If you don’t, spend a few minutes on this post because it will be worth your while.
Inc.com has a great interactive tool for any business — no matter what size. It’s an online calculator, and it helps a business executive determine whether or not to make a large expenditure. It does so by looking at a key metric: gross profit margin.
The calculator was created by Norm Brodsky, renowned startup expert. “Brodsky says that many people starting their own business don’t pay enough attention to, or clearly understand, the importance of determining gross profit and gross profit margin. Profit margins determine a company’s ability to absorb increases in overhead. Brodsky can’t say it loud enough: the most important goal for any business is keep the gross profit margin stable–never sacrifice the gross profit margin–ever.”
The calculator evaluates a proposed expense and determines how much in new sales your business would need in order to keep the same profit margin after making the expenditure. That’s a key way to look at any expenditure, tying it back to sales. Ask yourself: how many new sales would your company have to make?
The Internet is a powerful resource for small businesses and entrepreneurial enterprises, providing priceless help for growing a business. Inc.com’s calculator is a prime example. Check it out — it’s fast, fun and interesting.