I’m trying to get my mind around my finances and want to put this in terms I, someone who isn’t bad at math but isn’t super, can understand. Something like the title says - for every dollar I spend in X service area of my business, I get $Y back."

So for an area of my business, let’s say that I sold $100,000. With COGS and salary, it cost me $40,000. My gross is $60k, or 60%.

So back to my question, in this case is it “for every $1 I spend in this area, I get $1.40 back”? I just can’t get me head around this, so thanks for the help.

** and yes, I know there are more things to consider like other overhead and operating costs, but I’m trying to keep the example simple.

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  • InstAndControl@alien.topBEnglish
    1·
    1 year ago

    Note that COGS is not your only cost. You have indirect costs which may be fixed or recurring, but do not scale the same with sales revenue.

    So, at $40k of COGS, you might bring in $100k, but that doesn’t mean that 250% ratio will be necessary, scalable, possible, or competitive at $200k, $500k, $1MM of revenue.