Over the last several years, I have been urging distributors to pay attention to the gross margin percentage in their business. I have been holding the torch for relentlessly driving these percentages up because of the constant downward pressure the competitive process brings. Most of my drive has come from the thought that a 1 percent improvement in gross margin percentage generally translates to a 30 to 35 percent improvement in net profit. This is due to the overwhelmingly low net profit percentage, somewhere between 3 to 5 percent of sales, most privately held distributors achieve. Given this knowledge, a small bump in the gross margin percentage is a really big deal.
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