What is margin?
Margin is the share of money that stays after the money that leaves.
Sell something for a hundred dollars, spend seventy delivering it, and your margin is thirty percent. That is the whole idea.
There are more precise versions, gross and operating and net, and they matter once you are further along. At the start one question does most of the work: of every dollar that comes in, how many cents are still there at the end.
Why does revenue mislead men?
Because it is the number people ask about, and the only one that is easy to say out loud.
Nobody asks a man what his margin is at a party. They ask what the business did last year. So men optimise for the number they will be asked about rather than the one they live on.
A million dollars in revenue at four percent leaves forty thousand, a large team, constant obligation, and no room for a bad quarter. Four hundred thousand at thirty percent leaves a hundred and twenty thousand, a small operation, and the ability to take a Friday off without anything catching fire. The first number is the one you can say at a party. The second is the one you can live inside.
What destroys margin?
Three things, in this order.
Pricing set by fear rather than value, which almost every man does at the start and calls being fair.
Work accepted because it was offered rather than because it fits, which drags cost up invisibly.
And the quiet cost of doing everything yourself, which looks free and is not, because the hours have a price even when nobody invoices for them.
How do you improve it?
Raise the price before you cut anything. Almost every small operation is underpriced and the owner is the last to know.
Then count the fully loaded cost of delivering, including your own hours at a real rate.
Then stop taking the work that loses money, which is usually obvious once the first two are done and almost never obvious before.