Understanding Gross Margin
50% margin does not mean 50% profit. It means costs × 2 — and the difference funds everything else.
At 50% gross margin, $4,000 in direct costs sells for $8,000. The $4,000 difference funds overhead, taxes, equipment, and reserves. The owner already took their pay through the floor rate. Gross profit is business money — not the owner's bonus. …
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