The average of two businesses is neither of them

A single headline number can describe a customer you have never served, a job you never quote, and a month that never happens, while looking perfectly reasonable.

By Steve 4 min read
Abstract bridge artwork for The average of two businesses is neither of them

A management report says gross margin is 34%. The owner has seen that number for years and treats it as the shape of the business. Then someone sorts the job list by margin and the picture changes: a cluster of work lands near 50%, another cluster lands near 18%, and almost nothing sits at 34%. The average is arithmetically correct and descriptively false. It describes a job the business never does. This is not a data quality problem. It is a mixture problem. Two populations with different economics have been…

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