Jul 132010
 

I’ve seen this played out in all the businesses I’ve started, had a part in running, or consulted to.  You can have the greatest concept in the world, but if there are not solid gross margins (selling price less cost of goods or services) to begin with, you are starting with a major handicap.  You can afford to make a lot of mistakes (and we all do) when you are looking at margins of 60% or higher – I learned this basic cut-off point from one of my early mentors in business – Ian MacMillan at Wharton Entrepreneurial Programs.  Making mistakes is unavoidable; surviving them is not.  Make high or at least reasonable margins, one of your most important screening criteria when you are looking at potential ventures.  If you’re currently in a business with low margins, unless you plan on making up for them in volume, either realize that you’re probably never going to make much (if any) money in the business, figure out how to improve the margins, or move on to something that makes more sense.

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