Learn to Analyze Your Business Figures

Understanding your business’s financial figures is not only a good practice, but a necessity to ensure its sustainability, growth, and profitability. One of the most common mistakes in small and medium-sized businesses is making decisions based on incorrect perceptions or assumptions, often due to a lack of understanding of basic concepts such as Gross Profit Margin (GPM) . This metric is critical because it represents the direct profitability of the products or services sold, before considering operating expenses, taxes, and other indirect costs.

Gross profit margin is the difference between sales revenue and the cost of goods sold (COGS). This margin is generally expressed as a percentage of total sales. In other words, it tells us how much of each peso sold remains as gross profit, allowing us to assess the efficiency with which resources are being used for production and sales.

Practical example:

Let’s say you buy a television for 1,000 pesos and sell it for 1,300 pesos. The difference between the selling price and the acquisition cost is 300 pesos. At first glance, the profit margin may appear to be 30%, but this calculation is incorrect if based on cost. To obtain the correct MUB, the calculation must be based on the selling price:

MUB (%) = (Profit / Selling Price) x 100 = (300 / 1300) x 100 = 23.08%

This example demonstrates how many entrepreneurs overestimate their profits, believing they are earning more than they actually are. This overestimation can lead to inappropriate pricing strategies, underestimated operating costs, or misallocated resources, creating financial imbalances.

Importance of MUB in business management

Knowing the gross profit margin allows you to:

• Have a clear vision of the profitability of each product or service.
• Set appropriate prices.
• Detect opportunities for improvement in the supply chain or cost structure.
• Make informed decisions about investment, savings, and growth.
• Make more accurate financial projections.

It’s important to clarify that this analysis should be performed without considering taxes, discounts, returns, or other indirect expenses, as the MUB focuses on the relationship between sales and direct costs. Once the MUB is known, we can move on to the net income analysis, which already considers all expenses and taxes, allowing for a comprehensive evaluation of the business.

Therefore, mastering this type of analysis not only gives you control, but also provides tools to navigate intelligently in today’s competitive environment, where every percentage point of profit counts.

I hope I’ve encouraged you to review your company’s numbers and, accordingly, keep your quarterly planning within realistic parameters. If you have any questions, please don’t hesitate to contact us. We look forward to hearing from you!

We also invite you to review our article “Practical tips to improve your financial situation – Personal budget” , where you will have an approach to personal finances and thus you can learn to make more assertive decisions for your family and business.