Gross Profit/Gross Margin Definition

What is gross profit/gross margin?

Gross margin and Gross profit are two related metrics that are critical for understanding your business. Gross profit (GP) is the number of dollars of profit (dollars billed minus expenses and dollars paid) your business earns, while gross margin (GM) is the percentage of your total billable revenue that constitutes profits (dollars of profit divided by total revenue dollars).

What does it answer?

The most fundamental question answered by GP and GM is simple: how much money is my business actually making? However, financial data becomes a much more powerful tool when it lives in the same system as your ATS and CRM data and can be calculated at the level of each individual contract or placement. When financial data is that granular, you can roll it up to easily answer a new set of important questions: How profitable is each line of my business? How does my margin differ by candidate source? What is my average profit per interview for a given team or segment?  When you truly understand the successes (and failures) of each segment and activity of your business, you can then prioritize strategies and set goals to meaningfully improve growth and profitability.

How do you measure it?

Run a standard gross margin report for visibility into your business’ overall financial performance. Use ad-hoc reporting to segment your GM data to evaluate the profitability of each of your activities, prioritize resources, and proactively manage changing business conditions.

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