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CHAPTER 8 MASTERING YOUR MONEY

service business like mine, the cost of providing the service
(e.g. training services) would include transport, venue,
equipment rental and fees paid to trainers). By ensuring that
costs remain low, we can be assured that we are able to hit
our year-end profit targets.

Again, many businesses fail because their owners neglect to
measure their costs of production. As a result, they may end
up spending a lot more than projected and end up losing
money for every sale they make!

3) Gross Profit
If you sell each garment for $100 and it costs you $40 to
make that garment (COGS), then your Gross Profit per unit
would be $60. If you sell 10,000 garments, your total Gross
Profit will be $600,000.

So, “Gross profit = Sales Revenue – COGS.” This tells you
how much your company is able to mark up its product or
services over the cost of producing it. By increasing your prices
over time and reducing your COGS, you will be able to
increase your Gross Profits.

Aim To Keep Gross Profit Margin High

You can tell if your gross profit is healthy by expressing it as
a percentage, called your Gross Profit Margin.

Gross Profit Margin = Gross Profit x 100 %
Sales Revenue

In this case, the Gross Profit Margin of the fashion company
is $600,000/ $1,000,000 x 100 = 60%. This means that for
every $1 in sales, the company makes $0.60.

SECRETS OF BUILDING MULTI-MILLION DOLLAR BUSINESSES 247