Small Retail Shop Profitability Case
Business context
A small local shop selling everyday products such as snacks, drinks, and household items. The owner wants to understand how much the business actually keeps each month.
The numbers below are simplified fictional examples used for educational purposes.
The numbers
| Monthly sales revenue | $18,000 |
| Cost of goods sold (COGS) | $11,700 |
| Operating expenses (rent, utilities, staff) | $4,500 |
Step-by-step calculation
Gross profit = Revenue − COGS = $18,000 − $11,700 = $6,300
Net profit = Gross profit − Operating expenses = $6,300 − $4,500 = $1,800
Gross margin = $6,300 / $18,000 = 35%
Net margin = $1,800 / $18,000 = 10%
| Gross profit | $6,300 |
| Net profit | $1,800 |
| Gross margin | 35% |
| Net margin | 10% |
What this means
For every $100 of sales, about $35 stays after paying for the goods, and only $10 stays after also paying rent, utilities, and staff. A 10% net margin is a reasonable starting point for a small retail shop, but it leaves limited room for unexpected costs, price discounts, or slow months.
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What to check next
- Are some product categories pulling the gross margin down?
- Can suppliers be renegotiated to lower COGS by even 2–3%?
- Are operating expenses creeping up faster than revenue?
- Is there a way to grow average basket size without adding fixed cost?
Related calculators and guides
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This case study is for educational and planning purposes only. It is not accounting, tax, legal, investment, or financial advice. Numbers shown are simplified fictional examples.