One Overlooked Metric That Could Transform Your Company’s Value

You know gross margin impacts your profit, but have you considered the impact it has on the value of your company?

When assessing your company’s value, acquirers and investors will often scrutinize your gross profit margin. Gross profit margin is the difference between a company’s revenue and its cost of goods sold. In other words, it’s the profit a company makes from each unit of product or service sold after accounting for the cost of producing or delivering that unit but does not include other fixed expenses. For example, if a company sells a product for $100 and it costs $70 to produce and deliver it, the gross profit margin would be $30, or 30%.

A high gross profit margin is a crucial factor for investors and potential acquirers as it indicates that a company has established pricing power through marketing differentiation and possesses a competitive advantage. A strong competitive moat is an indicator of a company’s long-term sustainability, making it more appealing to potential investors.

Apart from raising prices or reducing input costs, an often-overlooked approach to improving gross margin is to invest in carving out a point of differentiation for your business in the minds of your customers. When your customers see your business as unique, you are less likely to have to compete solely on price. Charge a premium for a differentiated product or service, and you’ll beef up your gross profit margin—and the value of your company.

….

Want to know how to increase YOUR company value by 71%? Complete the free assessment for your value builder score, https://score.valuebuildersystem.com/significant-business-results-llc/franne-mcneal.

Follow Significant Business Results LLC, https://www.linkedin.com/company/significant-business-results-llc

Franne McNeal, MBA Significant Business Results, LLC Significant GPS Small Business Growth Services