Startups – The Importance of Gross Margin

One vital aspect that I often see entrepreneurs overlook in starting and managing a business is that of gross margin. Gross margin (sales minus direct costs) is what is left over after costs associated directly with the sale of a product or service, such as materials and direct labor, are paid for. This is an extremely important number for every new and small business to manage, as it impacts both the likelihood of reaching breakeven and the amount of profit that is earned beyond breakeven. In other words, it directly impacts risk and return.

by Jay Ebben, Ph.D.

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