Margin is everything in business. It is what you have left over after you've paid for your final product but before you pay for phone bills, rent and yourself. It is more helpful to think of margin as sales than as margin.
For example, if you sell a widget for $100 and it cost you $95 to make it then your margin is $5. That is 5% margin. If you are able to lower your cost to $94 and raise your price to $101 then you would make $7 and your profit would increase to 6.9%...an increase of almost 40%.
Would a 40% increase in profit make your business better? If your business nets you 100k per year you are now making 140k per year. Now your problems are more along the lines of naming your new boat.
Do you see why margin is so important?
It is also helpful to think about it this way:
If you work for 20 weekdays per month and your margin is 10%, then you only get paid on the sales from the last 2 weekdays in the month. So you will spend 18 of those weekdays hoping/worrying if you have customers on the last 2 days so you can take some bacon home.
On the other hand if your margin is 25% that means that all of the sales from the last week of the month are available to take home. That is a much safer and more pleasant way to operate. In a low margin business one day of bad weather, or a holiday, or a broken machine could steal your profits for the month.
When thinking about businesses think in terms of margin. Think about how you can expand it by selling more higher margin products and services, or think of how you can negotiate better costs. Remember the example from above? If you are in a low margin business a 1% decrease in costs goes a long way towards the bottom line. So does a 1% increase in prices.
