To all the new business owners out there: stop focusing on client acquisition and the constant drive to increase your revenue until you’ve actually looked at whether your gross profit margins are in a place where they’re scalable.
Let me explain what I mean by that.
The Common Pitfall of Focusing on Revenue
I’ve encountered countless businesses where the number one goal is to constantly drive revenue, get new clients, pump out ads, and push for growth in any way possible. They’re focusing on the top line—how much revenue they can generate—hoping that profit and cash flow will follow.
But here’s the catch: if your gross profit margin isn’t healthy, increasing your revenue is just going to make things worse in the long run.
What Is Gross Profit Margin and Why Does It Matter?
Simply put, your gross profit margin is the difference between your revenue and the direct costs it takes to acquire and deliver your product or service. It’s what’s left after you’ve covered the direct costs like marketing, production, and delivery.
If you’re pushing for revenue growth without a solid margin, you’re heading into dangerous territory. Think about it—razor-thin margins put you into a zone of risk. More sales, but not enough left over to cover the business’s costs or reinvest for growth? That’s a recipe for disaster.
Start with the Basics: Understand Your Margins
Before you even think about scaling or getting more customers, you need to understand your numbers—specifically, your gross profit margin. If you don’t have a healthy margin in place, the business will face problems as soon as you start pushing for more growth.
I recommend taking the time to sit down, identify what your margin looks like, and then strategise on ways to increase it. How can you extract more value out of your existing customers? How can you raise prices on products and services without losing customers?
Increasing Margins: The Key to Scaling
Once you’ve identified and optimised your margins, then you can start thinking about scaling—acquiring more customers, selling more products, and increasing revenue. But don’t skip the crucial step of getting the margin right first.
It’s like laying a strong foundation before you start building. Without it, everything else is built on shaky ground.
The Bottom Line: Build for Long-Term Success
If you’re starting a business or you’ve already got one running, take a step back and assess where you are with your gross profit margins. This should be your first priority before you push for growth and scale.
If you need help drilling down on the figures and understanding where things are going right (or wrong), business coaching can provide you with the clarity you need to strategise and move forward effectively.
Once your profit margins are in a good place, then—and only then—should you focus on scaling your business for long-term growth.
Frequently Asked Questions
How do I know if my gross profit margin is strong enough to scale?
A strong gross profit margin gives you the breathing room to reinvest in your business without running on fumes. As a guide, you want a margin that not only covers your direct costs but also leaves enough to support overheads, reinvestment, and profit. If your margin is below 30%, it’s time to review your pricing, costs, or delivery model. We can help you assess the numbers and build a margin that supports long-term, scalable growth.
I’m bringing in a lot of revenue—why don’t I have more money in the bank?
Revenue is just the top line—it doesn’t reflect what you keep. If your direct costs, like materials, marketing, or service delivery, are too high, your gross profit shrinks. That means you’re working harder, but not getting ahead. We help business owners drill down into where the money is going and identify how to improve margin without sacrificing quality or customer value.
What are some practical ways to increase my profit margins?
Start by analysing your pricing—are you charging enough for the value you deliver? Then look at your delivery costs—can you streamline or renegotiate supplier terms? Finally, consider upselling, bundling, or increasing retention with existing customers. Small tweaks can create big gains. We work closely with clients to implement these margin-boosting strategies in a way that fits their model and market.
Ready to Simplify Your E-commerce Finances?
Whether you’re looking to optimise your pricing strategy, improve client retention, or better understand your unit economics – we’re here to help. Book a free consultation with our expert team at New Wave Accounting & Business Advisory, dedicated to supporting businesses across Australia.
