Today, we're going to build a bridge over a canyon of misunderstanding. As with virtually all cases of misunderstanding, this one starts with miscommunication.

Guy and I run into the miscommunication frequently. It rarely causes great harm. However, it often leads to innocent errors that cost time and money and make year over year comparisons difficult for growing companies.

It also creates some annoyance to the individuals involved. If you've been involved in one of these little miscommunications, you probably were frustrated. If you were, we feel for you.

The miscommunication involves two very common terms: Gross Margin & Markup.

First, allow me to define them. Then, I will explain why everyone in your company needs to master their use and meaning. Formula time - YEA!

GM = GP / P

MU = P / DC

Well, that should have cleared everything up for you.

What? It didn't? Silly me. I'll carry on.

(Forgive me. My inner engineer is coming out. We think in formulas. It's true. We really are strange.)