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Are You Accurately Tracking What You Really Keep?
Arthur Wang
December 16, 2025
Profit is oxygen. Cash flow is king. But margin is your moat. Most entrepreneurs bleed out before they ever realize where the leak is. Revenue is a vanity metric. Only profit builds equity.
Old Way vs. New Reality: Stop Guessing, Start Auditing
The old way: Celebrate top-line growth. Ignore the small leaks. Trust your gut on costs. Let inertia run your subscriptions.
The new reality: Ruthless audits. Data-driven decisions. Relentless elimination of waste. Margin is not a feeling. It’s a number. Own it, or it owns you.
The Hard Truth About Profit Margins
You don’t earn what you invoice. You earn what you keep. Your “profit” is not what your accounting software spits out at the end of the month. Most small businesses confuse revenue with profit. The gap is where you either build wealth or burn it.
Three Margin Killers
Hidden COGS: You underestimate true delivery costs. You ignore the time, the failed experiments, the support overhead.
Zombie Costs: Old subscriptions. Duplicate tools. Unused software seats. They feed on your margins quietly.
Manual Blind Spots: You trust memory over data. You guess instead of measure.
Calculate Your True COGS—No Excuses
You can’t fix what you don’t track. COGS is not just what you pay vendors. It’s every dollar that leaves your account to deliver a product or service.
Step 1: List Every Direct Cost
Raw materials or inventory
Payment processing fees
Shipping and logistics
Contractor payouts
Software licenses tied directly to delivery
Support costs per transaction
Pro tip: If you can’t tie a cost directly to a sale, it’s not COGS. It’s overhead.
Step 2: Build Your COGS Calculator
You don’t need fancy software. Use a spreadsheet.
| Item | Monthly Cost | % Used for Delivery | COGS Allocation |
|-----------------------|-------------|---------------------|-----------------|
| Stripe Fees | $300 | 100% | $300 |
| Zapier (Automations) | $50 | 60% | $30 |
| Contractor Payouts | $2,000 | 100% | $2,000 |
| Shipping | $400 | 100% | $400 |
Sum the last column. Divide by your sales for the period. That’s your true COGS ratio.
Step 3: Calculate Gross Margin
Formula:
Gross Margin (%) = (Revenue – COGS) / Revenue x 100
Example:
Revenue: $10,000
COGS: $3,000
Gross Margin: (10,000 – 3,000) / 10,000 x 100 = 70%
A high gross margin means you have leverage. A low margin means you’re renting your time.
Service Delivery Costs—The Silent Killer
Service businesses get sloppy. They confuse “low overhead” with “high margin.” Time is your real inventory.
Step 1: Track Billable vs. Non-Billable Hours
Billable: Time spent directly delivering to clients.
Non-Billable: Admin, sales, revisions, project management.
Step 2: Calculate True Hourly Cost
Add up:
Labor (your time at market rate, not just salary)
Contractor hours
Software tools per seat
Client support and revisions
Example:
40 hours billed, 20 hours non-billable
$3,000 labor, $500 software, $500 support
Total cost: $4,000
Effective hourly cost: $4,000 / 40 = $100/hour
If you’re charging $120/hour, your real margin is thin. If you’re charging $70, you’re paying clients for the privilege of working.
Subscription Software: The Zombie Cost Audit
Old way: Set and forget. New reality: Audit or die.
Why Zombie Costs Eat Your Margins
You forget what you signed up for.
Multiple team members buy the same tool.
Seats go unused after turnover.
Trials turn into recurring charges.
Step-by-Step SOP: Audit Your SaaS Stack
Export All Transactions
Download credit card and bank statements for the last 12 months.
Filter for software, SaaS, and recurring charges.
Create a Subscription Tracker
| Tool | Monthly Cost | Owner | Seats | Used/Unused | Notes |
|----------------|-------------|----------|-------|-------------|---------------------|
| Notion | $40 | Alex | 4 | 2/4 | Duplicate w/ Glean |
| Glean | $60 | Jamie | 5 | 3/5 | Unused seats |
| Slack | $100 | Team | 10 | 8/10 | |
Identify Redundancies
Multiple tools solving the same problem? Cut one.
Unused seats? Cancel or reassign.
Old projects? Kill the subscription.
Set a Monthly Audit Reminder
Automate a calendar event. Don’t rely on memory.
AI Tools: Your Margin Defense System
Manual audits are slow. AI tools like Glean and Notion AI change the game.
Deploy AI to Scan and Flag Costs
Connect your credit card or bank feed.
The AI scans for all SaaS charges.
Flags duplicate subscriptions.
Identifies unused seats and old trials.
Sends you a report—no more guesswork.
Example Output:
“Notion: 4 seats, 2 unused. Glean: Overlaps with Notion. Slack: 2 seats unused. Action: Cancel or downgrade.”
Leverage Automation for Proactive Control
Set rules: “Flag any new SaaS charge above $30.”
Get monthly summaries of all recurring costs.
Compare last month’s stack to this month—see creep in real time.
Execution is the only differentiator. If you’re still doing this manually, you’re bleeding edge—of irrelevance.
The Profit Margin Audit Checklist
Don’t just read. Execute.
[ ] List every direct cost—COGS and service delivery.
[ ] Build and update your margin calculator monthly.
[ ] Export and review all SaaS and recurring charges.
[ ] Use AI to automate your subscription audit.
[ ] Eliminate, consolidate, or renegotiate every unnecessary expense.
[ ] Track margin monthly. Don’t trust “feel.” Trust data.
Binary Contrasts: Old vs. New
Old: Revenue is king. New: Margin is king.
Old: Manual audits. New: Automated, AI-driven controls.
Old: Ignore small leaks. New: Hunt and kill every leak.
Old: Work for income. New: Build for equity.
Stop Renting. Start Owning.
Profit margin is not a suggestion. It’s your scoreboard. If you don’t measure it, you don’t control it. If you don’t control it, you’re building someone else’s asset—not yours.
Treat every dollar saved as a dollar earned. Treat every margin point as leverage. Stack enough of them, and you build independence. Miss them, and you’re always on the treadmill.
The toolkit is here. The choice is yours. Build margin. Build leverage. Build ownership.
Execution is the only differentiator.
Frequently Asked Questions
Why is tracking profit margins more important than focusing solely on revenue?
The blog emphasizes that revenue is a vanity metric while profit margin is what truly builds equity. It explains that most entrepreneurs confuse revenue with profit, but only what you keep contributes to building wealth. A strong focus on margin means identifying and plugging the leaks in your cost structure to maximize the money you actually earn.
How do you calculate the true Cost of Goods Sold (COGS)?
The post advises that true COGS includes every direct cost associated with delivering a product or service—not just vendor payments. To calculate true COGS, list every direct cost (such as raw materials, shipping, payment processing fees, contractor payouts, etc.), allocate costs using a spreadsheet (with columns for monthly cost and percentage used for delivery), sum the allocations and then divide by your total sales to derive the COGS ratio.
What steps should be taken to audit subscription software costs effectively?
The blog outlines a clear process: First, export all transactions from your credit card and bank statements for the past 12 months and filter for software or recurring charges. Next, create a subscription tracker to list each tool, its cost, number of seats, and usage status. Then, identify redundancies like duplicate tools or unused seats and cancel or reassign them. Finally, set a monthly audit reminder to ensure these costs are continuously reviewed.
How can AI tools assist in margin optimization?
AI tools are presented as a modern solution to replace slow manual audits. By connecting your credit card or bank feed, these tools can automatically scan for all SaaS charges, flag duplicate subscriptions, identify unused seats, and even highlight old trials. They provide monthly summaries and reports that help you promptly address and adjust any creeping costs, ensuring that your margin is maintained and improved over time.
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