By Sudarsan Pattabiraman (Upclinch Inc) | 510.944.5616 | sudarsan@upclinch.com
Gross Margin vs. Operating Margin: Seeing the Story Behind the Numbers
If you’re running a small or mid-sized manufacturing business, chances are you’re keeping a close eye on your numbers. But are you watching the right ones?
After years spent helping manufacturing operations turn the corner—from
supply chain chaos to profitability clarity—I’ve learned this: not all margins
are created equal.
In fact, two of them—gross margin and operating margin—can reveal very
different truths about your business.
🔍 Gross Margin: The
First Glimpse
Gross margin is your first reality check. It tells you how
much profit is left after you produce your goods—but before you pay your staff,
rent, or run ads.
Formula:
Let’s say you sell a product for $100 and it costs you $60 to make.
That’s a 40% gross margin.
If your gross margin is falling, something on your production floor or
procurement desk likely needs attention—materials too expensive, yield issues,
or pricing mismatches.
⚙️ Operating Margin:
Where the Truth Lies
Operating margin steps back and asks a deeper question:
“After I run the whole show—salaries, repairs, admin, sales—how much
profit is left?”
Formula:
If that same $100 product nets you $15 after all operating expenses, your
operating margin is 15%. This is where many profitable-looking businesses
quietly bleed.
🧩 Why the Difference
Matters
In my consulting practice, I specialize in connecting market forces,
commercial strategy, operations, and technology into a clear narrative. Often,
I find businesses with healthy gross margins—but poor operating margins. That
gap? It’s where inefficiencies, disconnected teams, or outdated systems hide.
Gross margin tells you if you can make money.
Operating margin tells you if you can run a business.
💡 Final Thought
Margins aren’t just numbers—they're mirrors. They reflect how well your
business is aligned, from the production line to the leadership table.
If your margins are sending mixed signals, maybe it’s time to take a
deeper look. I help manufacturing leaders do just that—realign operations,
modernize systems, and connect strategy to execution.
Let’s turn your margin story into a margin advantage.
Ready to talk?
—
Sudarsan Pattabiraman
is an operations turnaround expert who has helped small and mid-sized
manufacturers connect market trends, commercial priorities, operational
execution, and digital tools to build profitable, resilient businesses.
Schedule time to
unlock the business value and realize it for the benefit of you, your family
and your community. Email:sudarsan@upclinch.com
Phone: 510.944.5616
