KPI for Measuring of Gross Margin as a % of Selling Price posted in category Sales

WinningKPI - Sales - KPI for Measuring of Gross Margin as a % of Selling Price posted in category Sales

KPI details:

This indicator is for measuring of the Profit from sales, as a % of the Selling Price;

More details:

This KPI stands at the core of a company’s selling success. It can be used as a benchmark of company’s success and stability. Also, companies benefit from maximizing the Gross Margin % KPI.

For instance, a company may set as a target a KPI Growth Margin of 40% for the next quarter, as a result of settling better deals with their suppliers (e.g. lower buying prices).

Formula:

Profit = Selling Price – Buying Price

Gross Margin = Profit / Selling Price x100

Or:

Gross Margin = (Selling Price – Buying Price) / Selling Price x100

KPI Units: %

KPI Time Frame: update quarterly or once a year

Posted by Oana Boteanu | Help to protect community: Flag for moderation

Ideas suggested by WinningKPI community:

Here are comments:

Gross Margin measures business profitability and for public companies is a key source of information for stakeholders. The fluctuation of this number represents business stability and market stake.

For instance, Tesco, a successful word wide Corporation (supermarket chain), has a stable Gross Margin Profit, ranging from 15% to 25% over the past decade.

However, in December 2009 it had a major Gross margin fall of -3.67%.

One can only assume that in order to recover, the corporation put in place strong strategies to come back as fast as 17.86% by March 2010 and 21.25% by Dec 2011.

Gross Margin is a very simple concept, rest costs of products sold from sales. The remaining value is profit before fixed costs.

For example a phone company may have 3.2 million in sales yearly, and a cost of sales of $2.4 million.

Gross Margin: ($3.2-$2.4)/ $3.2 = 0.25= 25%

This 25% may be used to cover rent, electricity, government taxes etc and then the remaining will be net profit.

Oana Boteanu | September 6, 2012 at 7:37 am

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