Did That Sale Actually Make You Money?

Closing a sale feels great. But here’s a question worth asking: Did that sale actually make you money? It’s surprisingly common for businesses to discover they’re breaking even on certain sales or, worse, losing money without realizing it. The difference between a profitable sale and one that costs you money comes down to one thing: Are you accounting for all of your costs?

Understanding Direct vs. Indirect Costs

Most business owners track their direct costs fairly well. These are the expenses directly tied to producing your product or delivering your service. For service businesses, direct costs are primarily labor—the hours your team spends on client work. For manufacturers, direct costs include labor and materials used to produce each product.

Where things get tricky is with indirect costs, which are easier to overlook but just as real. Indirect costs include your utility bills, office or production space rent, and all the people in the back office who keep the business running but aren’t directly tied to any specific product or service. These expenses add up quickly, and if you’re not factoring them into your pricing, you could be subsidizing your customers without realizing it.

Making the Numbers Work

Just because you made a sale doesn’t automatically mean it was profitable. Once you’ve identified all your costs—both direct and indirect—you might discover that your expenses exceed your profit margin. The solution could be as straightforward as adjusting your pricing to cover your actual costs, but you can’t make that decision until you’ve done the math.

This is where we see businesses have their “aha” moment. When you break down every cost associated with a sale and compare it to your revenue, the path forward becomes clear. Sometimes you need to raise prices. Other times, you might find opportunities to reduce costs or streamline operations. But you need accurate numbers first.

The Cash Collection Reality

Here’s another critical piece: invoicing a client doesn’t mean much until they actually pay. You can ship a product and send an invoice, but until the money hits your account, you haven’t completed a profitable transaction.

This means closely monitoring your accounts receivable. Make those collection calls when payments are overdue. Review your credit terms and compare them to industry standards. If your industry typically offers 30-day terms but you’re giving customers 60 days, ask yourself why. Are you being a bank to your customers? That extra 30 days ties up your cash and limits your ability to invest in growth.

The Bottom Line

Determining whether a sale is truly profitable requires considering the whole picture: your direct and indirect costs and your cash collection timeline. Get these pieces right, and you’ll have confidence that your sales are actually building your business rather than keeping your business stagnant.
If you’re unsure whether your sales are as profitable as they should be, it might be time to dig into the numbers. Contact us today, and we’ll help you understand what’s driving your profitability—and what might be holding it back.