Everyone Loves a Gross Margin

  By Terri Roeslmeier  |    Sunday February 26, 2018

Category: Columns, Expert Advice, Recruiting, Technology


What would we do without the good old Gross Margin Report? It is a handy guide that helps analyze our staffing firm’s profitability and forecast future revenue.  It is a very important tool if checked regularly because the information can help us make adjustments to ensure good profitability.  Gross revenue is one thing but the true bottom-line is profit.

The Gross Margin Report should be analyzed from a number of perspectives.  For example, when calculated by customer we can see which of our clients are the most profitable.  If you simply look at highest revenue, you may be missing the fact that one of your smaller customers are producing more revenue after costs.

Another great perspective is by employee.  Which employees are the good producers?  If you are processing credits because of low quality work or are lowering rates because of client dissatisfaction with the employee, it is good to know.  On the other hand, well-liked employees that are producing nice profits may be worth a raise or some other benefit in order to keep them loyal and happy.

What about internal employee productivity?  When the gross margin report is produced by consultant you can determine which of your internal employees are yielding the most profitable placements.  Are they reaching for low hanging fruit just to say they made a placement?  Is your placement leader really your “highest producer”?

Other great ways to review the gross margin data is to procure the numbers by: average gross profit $ per hour; # of employees considered in the equation; # of customers included in the calculation; by branch and by line of business.

In order to make the data more meaningful and provide more flexibility, you can view the data utilizing a “big-data tool”.  Big data tools are great because they offer graphical depictions that help identify data trends and alarming business problems.  In addition, most allow you to “slice & dice” the data from different perspectives.  This is important because often your environment will change beyond your control.  However, you do have control over how you are doing business and the gross margin information can help you avert bad business practices before it is too late and harmful to your business.

Often, you and your employees may not be aware of detrimental business numbers without looking at the reality of what is really happening.  It is very important to identify business issues as soon as possible. This is why it is valuable to study the gross margin report weekly and over the course of several weeks.  If you spot something unfavorable in your weekly numbers you can learn if this is just a bad week or an ongoing problem that must be addressed.

Make the Gross Margin Report your best friend.

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