Margin mar-gin: Noun to edge or the border of something; the difference which exists between net sales and to cost of merchandise sold; measure or degree of difference.
We hear the word “margin” and its adjective “marginal” a lot during this political season like: marginal tax rate; margin of error in a poll; operating outside the margin.
That little space in the “margin” is where much happens. Henry Ford understood about margins and is quoted as saying “If you need a machine and don’t buy it, you will ultimately find that you have paid for it and don’t have it.” This is the difference between short term success and long term rewards.
On the very small scale, a friend of mine decided that to help generate the cashflow at the end of the month to fund a retirement plan for herself, she would not replace her assistant. She would take the money saved and put it in the her IRA. She quickly discovered that she was doing about 30 more hours of work each week, and much of it on the weekend. She disliked the work, got tired, wasn’t keeping up with the sales and the work that generated income. After a few short months she was exhausted, grumpy, overwhelmed, and her family wondered who this strange haggard woman was. She was a victim of his own Marginal Thinking and just like Henry Ford said – by not buying the machine (assistant) she paid for it many times over and did not have it.
You can keep your marginal thinking at bay with planning and reviewing what is working and what is not.
Understanding margins is important. Join us on October 30 in Maumee for a fun look at financial statements that will help you understand margins. Details of the October 30 Workshop.
