What’s Really The Key to Successful Business?

Revenue often gets the spotlight. It’s what many business owners celebrate, share with peers, and use as their measure of success. But what really determines value isn’t how much money comes in, but how much stays. A company turning over $500k with strong margins can be far more valuable than a million-dollar business that’s actually leaking profit.

High-revenue, low-margin businesses are vulnerable. They have little room for error, and they’re increasingly busy yet constantly reinvesting to survive. Growth feels expensive, cash flow is tight, and the success they’re celebrating doesn’t actually translate into stability.

At The Co., our business advisors see this pattern constantly: businesses growing sales while profitability stagnates or declines. Understanding why that happens, and how to fix it, starts with understanding margins.

Here’s how to think about margin properly — and how to use it as a strategic advantage, not just an accounting figure.

Related Reading: Key Financial Metrics Every Business Should Monitor

When Revenue Growth is a Risk

Revenue growth is often treated as representative of progress. While it does signal momentum in demand and market traction, it doesn’t guarantee a healthy business.

Without profit margin improvement, increased sales simply fund the additional cost and complexity required to keep up with demand – more delivery pressure, staff or subcontractors, and system complexity.

In those cases, revenue can grow while profit per sale shrinks, leaving the business working harder but for less profit.

This is where many owners get stuck. They’re doing “well” on paper, but the business feels fragile. Cash flow tightens, staff are burnt out, customers are dissatisfied… And that’s all because you’re focusing on volume rather than value.

Read More: Scaling Smart

Early Signs of Success: Gross Margin

Gross margin is the percentage of profit in a sale price after subtracting direct costs (like materials, manufacturing, and direct labour) and is the earliest indicator of whether your business model actually works.

It answers a fundamental question: After delivering the product or service, is there enough left to run the business?

We regularly see businesses with high demand but weak gross margins. In other words, the work is selling but it just isn’t paying. Without guidance, those businesses end up compensating in ways that can negatively impact staff, owners and customers alike.

Gross margin analysis is where meaningful advisory starts. It’s the point where pricing, delivery, and strategy intersect, and where small changes can create big impact.

Strong gross margins mean pricing reflects real delivery costs, operations are efficient, and the business has room to absorb change and growth without breaking.

Longterm Success: Net Margin

After eliminating the direct costs, net margin subtracts what’s left: overhead. This can be rent, insurance, and administrative salaries, software, equipment… anything you spend to keep your business running.

A healthy net margin ensures that the business can fund its growth, it can survive in slow times, and it rewards the people running it.

Understanding the difference between gross and net margin helps diagnose the issues affecting profit. If gross margin is weak, the problem is usually pricing or delivery efficiency. If gross margin is healthy but your net margin is weak, this points toward an operational or structural inefficiency.

This is where The Co. helps businesses realign. Not by cutting costs blindly, but by understanding what’s pulling profits down and then restructuring with purpose.

Deeper Insight: Contribution Margin

Contribution margin shows how much a single product, service, or client contributes toward your business costs and profit. It can deliver some uncomfortable insights, like:

• Your most popular service isn’t actually profitable
• A small offering is quietly funding everything else
• Certain clients generate revenue but destroy margin

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At The Co., this analysis often becomes the turning point that guides client strategy. It allows businesses to redesign and adjust selectively in ways that actually increase profit.

Margin-focused businesses don’t need constant volume to survive. They grow sustainably, absorb unexpected setbacks more easily, and create opportunities for owners.

Most businesses already have the data they need, but what they lack is interpretation. That’s the role of your business advisors; at The Co.; we help owners move beyond surface-level reporting and into strategic insight.

If you need help translating margins into decisions that improve profitability and long-term value, we’d love to hear from you.

Related Reading: What Advisory Really Means in Business