Introduction to Gross Margins

Gross Margin: A Gross Margin is the calculated difference (margin) between the value of the OUTPUT of an enterprise less the INPUT expenses, known as the variable costs used to produce that output. Gross margin provides a single-figure estimate of the technical performance of an enterprise, the economic conditions in which it exists and the business acumen of the implementer. As such Gross Margins may be used to:-

• Determine the performance of a single enterprise during the year.
• Compare the performance of a single enterprise against targets or benchmarks.
• Compare the performance of a single enterprise on the same farm between years.
• Compare the performance of different enterprises in the same project or on the same farm in the same year.
• Compare the performance of similar enterprises in different projects or on different farms in the same year.
• Calculate theoretical enterprise performance under different economic conditions and at different levels of technical success.

The TechTalk Gross Margin Calculator (GMC) is designed to provide an immediate read-out and global enterprise average for all users entering data. Users who have registered through TechTalk and who have logged in, will receive down-loadable breakdowns of their performances, up-to-date league tables of similar enterprises by country and farm system and access to storage files for their data which they may revisit at any time.

Variable Costs: When calculating Gross Margins, it is important to remember to include only the costs associated directly with the production of that enterprise. This means that you should not include the overall or "fixed" costs of running your entire farm - that is, costs that remain unaltered whether or not you are engaged in this enterprise. However, we suggest you do include the costs of your own labour and any family labour directly associated with specific aspects of that enterprise, in the relevant sections - these should be entered, as accurately as possible, at the going local daily wage rate for men, women and children as appropriate.

To help prepare, all users should refer to the Gross Margin checklists which itemise the types of data required (see the boxes at the top of the New Crop gm and New Livestock gm pages). Providing all data will generate a complete gross margin. However, partial gross margins may also be generated from incomplete sets for specific interest groups (e.g. for dairy- the margin over the cost of concentrates).