Cost of Sales (sometimes called Cost of Goods Sold) is one of those metrics you’ll hear a lot when reviewing your operating costs and the overall profitability of your business model.

But what does ‘Cost of Sales’ mean? And how does understanding this key metric help you get a handle on the financial efficiency of your operations.

What is ‘Cost of Sales’?

The Cost of Sales (CoS) metric measures the direct costs involved in producing or acquiring the goods or services that your business sells over a given period.

Think of it as the money that disappears out of the door with each sale.

For a product-based business, it’s the cost of the raw materials, the labour directly involved in making the product, or the wholesale price of items bought for resale.

For a service-driven business, it’s the direct labor or subcontractor costs for delivering that service. It’s crucial for understanding your true profitability on each item or service sold.

How can CoS impact your business?

Knowing how much it costs you to produce one unit or sell one service can be an incredibly revealing metric. Spend too much on operational costs and your margins will be too small. Spend too little and the quality of your product or service may suffer.

Let’s look at the impact of your CoS number, and what it can tell you about the financial efficiency of your small business.

1. Profitability:

A high CoS directly reduces your Gross Profit Margin, impacting the money available to cover your operating expenses and ultimately shrinking your net profit. Managing CoS is vital for creating sustainable earnings from your business model.

2. Pricing strategy:

Understanding CoS is crucial for setting competitive prices while remaining profitable. If your CoS is too high, you might underprice, leading to losses. If you overprice, you run the risk of losing price-sensitive customers. Your CoS is vital for guiding your minimum selling points.

3. Inventory management:

For product-based businesses, your CoS number is directly linked to your inventory valuation and management. When you reduce waste or obsolescence through efficient, proactive inventory management this directly lowers your CoS and improves cashflow.

4. Operational efficiency:

Analyzing your CoS helps you identify any potential inefficiencies in your production or service delivery. This could include areas like excessive material waste or unproductive labor. Streamlining these processes directly reduces your CoS and boosts operational performance.

5. Financial health:

When you manage your CoS well, you can build real strength into your financial health. Good cost control gives you solid financial foundations on which to grow the business. And by improving areas like operational efficiency and your gross profit margin, you also make your business more attractive to lenders and investors – opening up better access to funding.

Talk to us about reviewing your Cost of Sales

Want to give your financial health a welcome boost? Getting in control of your CoS and your operational efficiency is an important way to do this.

Book some time with our team to review your numbers and get your CoS under control.

The following content was originally published by BOMA. We have updated some of this article for our readers.

A solopreneur running a complete and viable one-person business is no longer a pipedream.

Sam Altman, the co-founder of Open AI, was recently quoted as saying that a one-person, billion-dollar business could be possible by 2026-2028, using tools like GPT-5 and the other generative AI tools that allow individuals to create and manage AI agents.

The idea that one person, a solo CEO and entrepreneur, could generate that kind of capital on their own, would have seemed crazy less than a decade ago. But with the power of AI and the accessibility of flexible coding tools and AI agents, it’s a real possibility.

Let’s look at how a one-person business could work, and how the basic business model differs from the traditional tech start-up model that we’ve known for so many decades.

How the old startup business model worked

Technology and software-based business models have been with us since the 1970s. Software has brought us into the digital age and given us a host of new tools to play with. And delivering a software-based business model has had a standardized model.

You will:

1. Have your initial idea for a software product
2. Write a business plan
3. Look for funding (whether private or public)
4. Hire a small team and start the business
5. Develop and launch the product
6. Find and convert your customer audience
7. Refine the product and scale the business
8. Generate revenues and make a profit (if you’re lucky!)

This is the old model. It works, but it’s slow to scale, needs multiple people and requires significant funding to make it work.

How a one-person business model works

There are multiple differences between the old start-up model and a one-person, solopreneur business model. The one-person model is predicated on the foundations of artificial intelligence (AI) and its ability to remove the staffing needs and automate your processes.

Typically, with a one-person model you would:

1. Start with finding an audience – likely using a social platform to connect with potential customers
2. Discover the needs of this audience and develop your business idea
3. Create a basic coded version of your product/service idea using AI (vibe coding)
4. Launch the product and refine it based on audience feedback
5. Build a tangible community around your product
6. Build AI agents that can be tasked with automating every aspect of service delivery
7. Scale the business quickly and increase your audience exponentially
8. Generate fast-growing revenues and hit your aspirational profit targets

The new model is less reliant on people and faster to grow. It can be controlled, in theory, by one solopreneur with the skills to utilize AI, create basic coding and find the right business idea.

What’s the true opportunity of the one-person business?

The true opportunity of the one-person business is to be able to found, operate and scale your business idea without any of the traditional foundations of a tech start-up.

• • You don’t need a huge team – in fact you might be able to run the entire enterprise yourself
  • Your delivery is entirely digital – so there’s no need for physical production processes
  • Your overheads are negligible, increasing your profit margins and revenues
  • AI agents can scale easily as the customer demand grows
  • Automation and AI removes the need for you to work ‘in the business’
  • As the solopreneur, you guarantee yourself an income and lifestyle.

What are the potential downsides of the one-person business?

The idea of being able to generate thousands, millions or even billions of dollars from a business where you’re the only human employee might seem like utopia to some.

But as with any utopian dream, there are potential issues and downsides to the solopreneur dream of creating a one-person, billion-dollar business.

Here are some possible outcomes to consider:

• • You could over-automate and lose connection with your customers
  • Your tech may break, failing to operate and scale as intended
  • Your AI agents may produce garbage outcomes and ‘AI slop’
  • You may feel the pressure of running the business solo, with no other founders
  • You may miss the social aspect of being part of a human team

Sam Altman’s dream of a one-person, billion-dollar business may become a reality over the coming years. With the speed of AI development, it’s more than possible.

The following content was originally published by BOMA. We have updated some of this article for our readers.

Knowing your customers inside out is one of the major keys to making your business a success. But how much research have you done into the persona of your ideal customer?

Having an Ideal Customer Profile is foundational to your sales and marketing strategies. But many small and micro businesses don’t have a drilled down customer profile.

Let’s explore what an Ideal Customer Profile is and how it refocuses your strategy.

What’s an Ideal Customer Profile?

Your Ideal Customer Profile (ICP) defines the type of company or customer that’s most likely to buy and benefit from your small business’s products or services.

The ICP outlines key characteristics, needs and pain points, helping you to guide your sales and marketing efforts to target and acquire the most valuable clients.

How to use your ICP to drive your sales and marketing efforts

By defining a clear and detailed ICP, you provide the foundations for targets and effective sales and marketing activity.

With this ICP in place, you can focus your marketing spend on channels used by your ideal customer, tailor messaging to address their specific pain points, and refine your sales pitches to highlight the most relevant and engagement benefits.

This targeted approach increases your conversion rates, reduces the wasted effort of poor targeting and, ultimately, boosts the efficiency of your sales function.

5 elements to include in your ICP

To create a useful ICP, it’s important to do your homework and to drill down as deeply as possible into the details of your customers, their needs and their demographics.

To create an effective ICP, here are five elements to include in your profile:

1. Demographics and firmographics:

Define the basic traits of your perfect customer. For business-to-consumer (B2C) companies, this will be things like age, location, income bracket. For business-to-business (B2B) companies, you’ll focus on the client’s industry, size and revenue etc.. This foundational data helps segment your market and target customers more precisely and efficiently.

2. Pain points and challenges:

List the specific pan points your ideal customer faces, and that your product or service solves. By understanding these customer issues and needs, you can deepen your messaging and offer the most direct, empathetic solution to the customer’s problem.

3. Goals and aspirations:

Find out what your ideal customer wants to achieve, both personally and professionally. Knowing their objectives helps you align your solution to these specific goals, helping you to add real value for the customer as a trusted and understanding vendor.

4. Buying triggers and process:

Delve deeply into what prompts your customer to look for a solution and their typical purchasing journey. This helps you time your marketing efforts effectively and tailor sales strategies to the customer’s preferred decision-making path.

5. Preferred communication and social channels:

Pinpoint the marketing channels where your ideal customer finds information about a potential purchase. Also find out where they engage with your business (and others) through social media.

These insights help to guide your marketing to the most effective platforms, giving you the best possible chance of engaging the target, converting them and, potentially, turning them into both a follower and a customer.

Having a thorough and detailed ICP is foundational to your sales and marketing. It gives your sales activity a specific focus and allows you to understand which marketing channels are most likely to deliver the results you’re looking for.

The following content was originally published by BOMA. We have updated some of this article for our readers.