Recent Articles

Gross Margin

Sales less costs of goods sold equals’ gross profit. Stated in a different way, price less variable costs equals contribution margin. However, in traditional accounting, the cost of goods sold section includes more than just the variable costs associated with the sale of the product.

Gathering Data from Sales

08/08/2016

In business the best source of new business is the existing customer.  Discovering the customer’s habits and characteristics allows the sales department to expand into new geographical territories with similar customer characteristics and/or [...]

Margins in Construction

05/06/2015

I’ve been asked to identify the average margins in the construction industry.  Honestly, there is no such thing.   I tried and after several hours of research I couldn’t even get one of the types of contractors to have consistency in their [...]

Carpet Cleaning Service – Margins and Expenses

03/27/2015

A very common small business in the service industry is the carpet cleaner.  Many owners of such businesses desire to know the margins and of course the associated operating expenses involved.  This article addresses these two questions and I’ll [...]

Flipping Houses – Proper Inventory Turnover Rate

02/27/2015

In your typical business operation, turning the inventory over as often as possible has several benefits.  First, it generally reduces overall costs, secondly, it generates greater profits and third, by increasing the profitability, the company has [...]

Types of Business Models

02/24/2015

In business there are four distinct business models.  Just about any business can be identified with one of the four.  The following are the four types of business models: Low-Volume, Hi-Margin Hi-Volume, Hi-Margin Low-Volume, Low-Margin [...]

Mixed Costs

12/16/2014

Mixed costs are a more advanced business concept.  Mixed costs refer to a combination of both a fixed and variable component.  A common error made by most small business entrepreneurs is the misapplication of the formula.  Many small business [...]

Substitution Principle in Business

11/24/2014

There are a multitude of principles used in business, some are industry specific, others are functions of business.  But there is one that is a general principle that is used across the board in all areas of business.  It is called the [...]

Definition of Contribution Margin

04/06/2013

Contribution margin is a core business concept and is often used in cost accounting to identify the amount of financial contribution a sold product provides to the company.  Simply put, contribution margin is the sales price less the direct costs [...]