Margin

Margin is the part of the price you keep after paying for what the sale itself costs. Direct costs are the ones that grow with each sale: materials, outside work, delivery, payment fees. Rent and salaries that stay the same every month are not in it.

Revenue tells you how much came in. Margin tells you how much of it can pay for the team, advertising and profit. The direct costs usually live in accounting, not in the CRM. Ask finance for a cost per product, then keep an expected margin field on the deal.

Count only the costs that grow with each sale; rent and fixed salaries stay out.

Price $1,000, direct costs $600: margin $400, or 40%. A 10% discount leaves $300, or 33%.

The owner reads margin monthly, by product and by seller. The head of sales reads it weekly on deals at the decision stage. The question is simple: after this discount, is the deal still worth doing. If the answer is no, the deal goes to a trade-off or to the owner.

Margin changes several decisions. It sets the limits in discount authority, since every discount comes straight out of it. It is the base of profit per deal, which subtracts the cost of getting the customer. And it shapes the commission plan: paying on revenue rewards deals that may earn little.

Look at margin next to average deal size. A larger average deal can hide a lower margin, if the larger deals carry larger discounts. When both move, check margin first. That tells you whether growth is real or bought with discounts.

• Mixing margin and markup. Markup is counted on cost, margin on price. Example (invented numbers): a cost of $600 and a price of $1,000 give a 40% margin but a 67% markup. Agree on one word and one formula.
• Counting fixed costs as direct. Then every deal looks thin and every discount looks impossible. Keep only the costs that grow with each sale.
• Ignoring non-price concessions. Free extra work and long payment terms cut margin like a discount does. Put their cost into the deal before approval.
• Paying commission on revenue alone. Sellers will push volume, even at a thin margin. Consider a margin floor below which commission drops.

By Friday, the head of sales asks finance for the direct cost of each main product. Add an expected margin field to the deal card in the CRM. Fill it for every deal now at the proposal or decision stage. Bring the three deals with the lowest margin to the next pipeline review. Decide with the owner whether each one is still worth doing.

Which numbers to check every week, with one definition for the whole team.