
Revenue – Direct costs = Gross Profit.
Direct costs are cost you incurred BECAUSE you sold that thing. Direct Labor, Materials, Sales Commission, etc. If you didn’t sell it, you would not have those costs.
So the revenue you have minus your direct costs = gross profit dollars. That is what you run the business on.
Gross profit dollars pay for indirect costs (“General and Administrative” costs) including marketing, all the people in the office and warehouse, vehicles, insurance, IT, etc., etc.
Most importantly, what is left over from gross profit after all indirect costs are paid is NET profit.
You run your business on Gross Profit.
So, what is your gross profit? To increase it you can raise your prices, or sell more, or lower your direct costs.
What do you need to do now to have more gross profit dollars come into your business from operations?
Good morning to everyone from beautiful North Carolina.