Gross Margin: Your Key Profit Driver

In our last article, we took a macro trip through the ratios and the road map to demonstrate the Profit Mastery process. (See "Rx for Survival," JCK, March 2004, p. 76.) This time we'll use the same road map to drive deeper into the gross margin (GM) issue, because it's one of the two key success drivers in the jewelry industry. So, let's focus on gross margin—how to measure it, how to manage it, and how to improve it. In order to take positive action in any situation, you need to know three things: where you are, where you want to go, and how to get there. Measuring gross margin is relatively easy. Simply subtract your direct costs from your sales. Direct costs are your cost of product or cost of goods sold (COGS). Express the resulting figure in dollars, and we'll call it gross profit. Express the resulting figure as a "percent of sales," and we'll call it gross margin. A quick s
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