The average margin is 38%. Nothing you sell earns 38%.

Blended margin is an arithmetic artefact of your sales mix, and it can improve in the same quarter that every part of the business gets worse.

By Steve 5 min read
Abstract bridge artwork for The average margin is 38%. Nothing you sell earns 38%.

A single blended gross margin is one of the most quietly dangerous numbers in a management pack. It is not wrong, exactly. It is an average of things that behave differently, weighted by how much of each you happened to sell. When the mix moves, the average moves, and it moves for reasons that have nothing to do with whether the underlying work got more or less profitable. The consequence is that a business can watch its headline margin improve while the economics of every single thing it sells deteriorate.…

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Important: General information only. Rialto Bridge articles describe patterns and considerations that may apply to a business; they are not financial, legal, tax or accounting advice, and they take no account of your particular circumstances. Consider your own situation and seek advice from a qualified professional before acting.

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