What is gross profit?
Gross profit for your poultry farm is calculated by subtracting the expenses (cost of goods sold) from the sale revenue received.
Gross profit is also known as gross margin.
It is the margin of money left over after you’ve sold product and paid for the direct expenses.
Understanding gross profit
Gross profit is (again) as variable as your expenses and your product prices are.
As they change, your gross margin changes.
Gross profit is a cumulative figure. It is the combination of all the monies left over after all the sales you have made within a given period, minus the related direct expenses.
Gross profit can be expressed as both a number and a percentage.
As a number, it tells you how much money you have leftover to pay overheads, deductions and investments.
Here is an equation for calculating gross profit for your poultry farm:
Gross Profit = Revenue – Cost of Goods Sold
Gross profit is a very important financial indicator for businesses.
It’s the first hint you get of profit.
Whilst it doesn’t answer the question of if your poultry farm is truly profitable (after all outgoings),
It does give you a feel for whether or not you are on the right track.
Benchmarking your gross profit against industry averages is also a good way of comparing your performance.
Like for like comparisons give you an idea of where your enterprise fits in the pecking order – amongst peers.
Far from a vanity project, such comparisons give very valuable analytical insight.
The bottom line is, your nearest peers will be experiencing similar environmental market conditions to you:
If your outcome of gross profit seems far lower than your peers,
This would indicate there are inefficiencies within your business model.