TradeBriefs Editorial

From the Editor's Desk

Contribution Margin: What It Is, How to Calculate It, and Why You Need It

To understand how profitable a business is, many leaders look at profit margin, which measures the total amount by which revenue from sales exceeds costs. But if you want to understand how a specific product contributes to the company’s profit, you need to look at contribution margin, which is the leftover revenue when you deduct the variable cost of delivering a product from the cost of making it. To calculate this figure, you start by looking at a traditional income statement and recategorizing all costs as fixed or variable. This is not as straightforward as it sounds, because it’s not always clear which costs fall into each category. And this is where most managers get tripped up. But going through this exercise will give you valuable information. Analyzing the contribution margin helps managers make several types of decisions, from whether to add or subtract a product line to how to price a product or service to how to structure sales commissions. But never look at contribution margin in a vacuum. Before making any major business decision, you should look at other profit measures as well.

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TradeBriefs Editorial

From the Editor's Desk

How to Speak Up When It Matters

When you notice something ethically questionable, encounter offensive speech, or disagree with consensus opinion, speaking up can be hard to do. Most people tend to not act, and then rationalize their inaction. But you're not really doing your job - as a diligent employee, compassionate colleague, or thoughtful leader - if you don't lend your voice to the conversation. So what can you do? First, realize how just how psychologically difficult but worthwhile speaking up can be. Second, work to lessen the social threat that it creates, making it clear that you're not out to get anyone. Third, make an if-then plan: if I see this, then I will do that.

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TradeBriefs Editorial

From the Editor's Desk

What Self-Awareness Really Is (and How to Cultivate It)

Although most people believe that they are self-aware, true self-awareness is a rare quality. In this piece, the author describes a recent large-scale investigation that shed light on some of the biggest roadblocks, myths, and truths about what self-awareness really is - and what it takes to cultivate it. Specifically, the study found that there are actually two distinct types of self-awareness, that experience and power can hinder self-awareness, and that introspection doesn't always make you more self-aware. Understanding these key points can help leaders learn to see themselves more clearly.

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