Learning CenterStage 3 · StrategyGuide 16 of 22
By the Numbers
Division Profitability
Sales mix isn't profit mix.
A single company-wide margin tells you how the whole business did, but not which line of business earned it. Splitting sales and gross profit by division shows where the money really comes from.
Where the sales come from vs. where the profit comes from
Example: $1.32M company, one yearRevenue mix
Gross profit mix
- Maintenance
- Enhancements
- Installation
- Snow & Ice
Each division on its own
| Division | Revenue | Margin | Gross profit | Share |
|---|---|---|---|---|
| MaintenanceRecurring contracts that renew. Steady, predictable cash. | $600,000 | 62% | $372,000 | 46.7% |
| EnhancementsExtra work sold to maintenance clients. Small jobs, strong margins. | $240,000 | 65% | $156,000 | 19.6% |
| InstallationBig tickets, often bid against competitors. Estimating risk is highest here. | $360,000 | 52% | $187,200 | 23.5% |
| Snow & IceFills the winter gap. Results swing with the weather. | $120,000 | 68% | $81,600 | 10.2% |
| Whole Company | $1,320,000 | 60.4% | $796,800 | 100% |
Gross profit = Revenue × Margin. Share = that division's gross profit ÷ total gross profit.
What the split tells you
Sales mix ≠ profit mix
Installation brings in 27.3% of sales but only 23.5% of gross profit. Growing it without fixing its margin pulls the whole company's margin down.
Recurring revenue is gold
Nearly half of sales come from maintenance contracts that renew. Banks and buyers value predictable revenue more than one-time jobs.
The next step
Set up your books so every job, crew and cost is coded to a division. Then share overhead fairly to see net profit by division.
Try it with your own divisions
Starts with the example company's numbersYour revenue mix vs. your profit mix
Enter a year of revenue and the gross margin for each division. Leave a division at 0 if you don't run it.
Revenue mix
Gross profit mix
- Maintenance
- Enhancements
- Installation
- Snow & Ice
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