The average that hides two businesses

A single blended margin can rise while every part of the business gets worse, and the arithmetic that allows it is more common than most reporting packs reveal.

By Steve 4 min read
Abstract bridge artwork for The average that hides two businesses

Most management packs report one gross margin, one average order value, one average lead time. The number is arithmetically correct and often describes nothing that actually happens in the business. If the book of work contains two different kinds of trade (a fast, small, high-margin flow and a slow, large, thin-margin flow) the blended figure sits in the gap between them, describing a job nobody ever does. That would be a harmless curiosity if the average were only a summary. It isn’t. It becomes the basis for pricing, for capacity…

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