Business Finance
Understanding the Numbers Behind Pricing and Margins
5 min read
Revenue tells you how busy you are. Margin tells you whether being busy is worth it.
Know your true cost of delivery
Direct costs are easy to see; the cost of your own time, rework, and unbilled hours is not. Until those are included, your gross margin is optimistic.
Price from margin, not from competitors
Benchmarking is useful context, but a competitor's price reflects their cost base, not yours. Set a target margin per product or service line, then test what the market accepts.
Review the mix, not just the total
Most businesses have a small number of offerings that carry the result and several that dilute it. Reporting by line makes that obvious and gives you something to act on.
Decisions improve when you can see margin by line. That is a reporting problem before it is a pricing problem.
