Revenue – Direct Costs = Gross Profit – Indirect Costs = net profit.
Yesterday we talked about increasing gross profit dollars coming in to pay for indirect costs (G & A expenses) so we can have a better net profit.
What if we had less Indirect expenses to pay?
Look at all your expenses closely. What can you cut without hurting your business?
If your gross margin is 40%, for every dollar in indirect expense you cut you can lower your breakeven by $2.50.
For every dollar cut in indirect expenses, you will send that dollar to your net profit.
Financial illiteracy is very expensive.
Be smart. Take the time. You got this.
Hi Larry, this where I struggle… What should gross margin be? 30, 40, 50%? Should some items be less margin such as blowing in insulation and some higher e.g. crawl space encapsulation? Read your blogs everyday! Thanks for what you do.