North East Business News

Issue 122

Many SME owners understandably focus on revenue. Sales growth often feels like the clearest signal that the business is moving in the right direction. Orders are increasing, customers are returning and the team is busy. Yet revenue on its own rarely tells the full story. One of the most revealing exercises in any growing business is to step back and analyse gross profit in more detail. Looking beneath the headline numbers A set of management accounts might show a healthy overall gross margin. On the surface, everything appears to be working. However, when the numbers are broken down further, the picture can sometimes look quite different. A detailed gross profit review might examine: individual product or service lines, practice areas or business units different customer or client segments the impact of discounts or pricing pressure how direct labour, staff time or delivery costs are allocated It is often at this…