Gross profit is the first line of financial health. If you can't generate enough gross profit, nothing downstream works — there won't be enough left to cover overhead, pay the owner, and still generate net income.
A concrete example
If your business brings in $400,000 in revenue and spends $160,000 on direct costs, your gross profit is $240,000. That $240,000 has to cover all operating expenses, the owner's pay, debt service, taxes, and whatever profit remains.
Gross profit and the LER
In Greg Crabtree's Simple Numbers framework, gross profit is the numerator in the Labor Efficiency Ratio: LER = Gross Profit ÷ Total Labor. This makes gross profit doubly important — it's both the measure of direct cost efficiency and the input to the most useful operational metric in the Simple Numbers system.
See these numbers in your own monthly Clarity Report.
Get Started →