42 | The One With the Margin Lie: Why Your 65% Gross Margin Might Actually Be 12%

Most founders know their gross margin by heart.Sixty-five percent. Seventy percent. A number that sounds healthy and investor-ready.In this episode of Supply Chain Moves, Lara explains why that number is often lying to you.Gross margin only tells you what it costs to make a product. It says nothing about what it actually costs to sell it, ship it, return it, and acquire a customer for it. And at the $500K–$3M stage, that blind spot quietly destroys otherwise great brands.You will hear real examples of DTC founders scaling their “best sellers” straight into losses, including a hero SKU with a beautiful 68% gross margin and a negative contribution margin once the real costs were counted.By the end of this episode, you will know exactly how to calculate the one margin number that actually matters and how to use it to make better decisions across marketing, inventory, and product strategy.In this episode, we cover:Why gross margin is a vanity metric at the growth stageThe difference between gross margin and contribution margin by SKUA real example of a best-selling product losing money on every saleThe seven costs most founders forget to include in their margin mathWhy your “hero product” might actually be your biggest problemHow to build a simple contribution margin calculator in a spreadsheetWhat to do with products that have low or negative contribution marginHow to realign marketing, finance, and supply chain around one shared numberKey takeaway:Gross margin is for pitch decks.Contribution margin is for survival.If you are making decisions based on gross margin alone, you are flying blind.Action step:This week, calculate contribution margin for your top five SKUs.Just five. The results will probably surprise you and tell you exactly what needs to change next.If this episode helped make your supply chain a little less painful, share it with another founder because nobody deserves to learn these lessons the hard way. Follow Supply Chain Moves wherever you get your podcasts.Connect with Lara & Move Supply ChainWant to keep learning and connect with Lara and the Move Supply Chain community?Follow & Subscribe:⁠LinkedIn – Move⁠⁠LinkedIn – Lara⁠⁠X – Move⁠⁠X – Lara⁠⁠Facebook⁠⁠Instagram⁠⁠YouTube⁠Get more insights:⁠Unboxed Weekly⁠ – Lara’s newsletter on DTC supply chain moves⁠Lara’s AI Brain⁠ – Ask Lara’s AI anything about supply chainSC Lounge⁠ – Join Move Supply Chain's free Slack community for DTC founders