The importance of knowing your numbers

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By DAVE ERICKSON

It is important for a small business owner to know their numbers. Sales, amount of cash in the bank, labor costs, current accounts receivable aging, and average client ticket amount are all examples that could be important for a business owner to know.

One of the most important financial measures is gross margin, or top line margin. Basically, gross margin is the profit that is left over when you subtract your cost of goods (or service) from your sales. It is the profit used to contribute to covering fixed costs in order to have enough left over to yield a net profit, or bottom line profit.

 

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