Gross Profit Explained for Small Businesses
Gross profit is the money left after subtracting the direct cost of goods sold from sales.
Sales are not profit
If you sell an item for KSh 1,000 and it cost you KSh 700, your gross profit is KSh 300 before other expenses.
Know your product costs
To understand gross profit, you need to know how much stock or materials cost the business.
Compare products
Some products sell quickly but have low profit. Others sell slowly but give better margins.
Use gross profit for pricing
If gross profit is too low, review prices, supplier costs, discounts and stock control.
Gross profit helps owners understand whether sales are genuinely worthwhile.
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