Gross Margin vs. Operating Margin: Seeing the Story Behind the Numbers

 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.

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🔍 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.

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⚙️ 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.

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🧩 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 It’s where inefficiencies, disconnected teams, or outdated systems hide.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.

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💡 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?

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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