Revenue matters. It shows that customers want what a business sells, creates opportunities for growth, and helps attract potential buyers.
But revenue alone does not make a business profitable—or valuable.
One of the most important metrics hiding beneath the top line is gross margin: the difference between the revenue generated by a product or service and the direct cost of delivering it. For accounting professionals, understanding this number can improve the direction of their own firms and help their small business clients make smarter decisions.
The Lesson Behind Suja’s $120 Million Business
Jeff Church built Suja, a cold-pressed juice company, from zero to $120 million in revenue in approximately five years. Suja secured Whole Foods as its anchor retailer and was named its supplier of the year out of 50,000 vendors. The company also attracted an investment from Coca-Cola at a $300 million valuation.
From the outside, Suja appeared to be a remarkable success.
Then Coca-Cola declined its option to acquire the rest of the business. Jeff received the news on the eve of July 4. He walked downstairs to his waiting wife and children and broke down in tears.
Although Suja generated $120 million in revenue, it also had $40 million in debt maturing within six months and was losing $9 million per year.
The company had plenty of revenue. What it lacked was a strong enough gross margin to turn that revenue into sustainable profit.
Finding the Better Business Within the Business
With the board pushing to sell the company for whatever it could get, Jeff chose a different path. Instead of simply cutting expenses and accepting a smaller loss, he examined Suja’s product lines.
The company was known for cold-pressed juice, which produced a gross margin of approximately 30%. Its kombucha line generated a gross margin of only 15%.
Suja also offered wellness shots. The product line had been largely overlooked for years, despite generating gross margins of approximately 65%.
Jeff eliminated the kombucha, reduced the company’s emphasis on juice, and reorganized the business around wellness shots.
Within two years, Suja went from losing $9 million annually to producing $20 million in EBITDA. That transformation did not happen because its revenue suddenly exploded. It happened because the company changed what it sold and prioritized the products that produced better margins.
Suja eventually sold for $325 million.
Why Gross Margin Matters to Buyers
A potential buyer is not simply purchasing a company’s past revenue. The buyer is investing in the cash flow the business may generate in the future.
Gross margin helps show how much money remains after delivering a product or service. That money must cover operating expenses before it can become profit. When gross margins are too low, even impressive revenue may fail to produce a healthy business.
Two companies generating $120 million in revenue can have completely different values if one operates at a 15% gross margin and the other operates at 65%.
Jeff did not invent an entirely new company to turn Suja around. The solution was already inside the existing product line. He simply had not reorganized the business around it.
What Accounting Firm Owners Should Consider
This same lesson applies to accounting firms. A firm may generate significant revenue while its owner remains overworked and underpaid because too much time is devoted to low-margin services.
Firm owners should examine the true cost of delivering each service, including staff time, software, administrative work, client communication, and corrections. They may discover that their highest-volume service is not their most profitable one.
For example, a firm might generate substantial revenue from basic compliance work but earn stronger margins from tax planning, business advisory, cash-flow forecasting, or CFO-level services. The answer is not necessarily to eliminate every lower-margin service. Some services create valuable client relationships or lead naturally to more profitable engagements.
However, firm owners should know which services produce the best margins and decide whether their current use of time reflects that knowledge.
Turning Margin Analysis Into Advisory
Bookkeepers, accountants, and business advisors can provide this same insight to their small business clients.
A traditional financial review may show the owner which products generate the most revenue. An advisor can take the analysis further by identifying which products, services, customers, or locations generate the strongest margins.
Useful questions include:
- Which offering produces the highest gross margin?
- Which products generate revenue but little profit?
- How much time and attention does each offering require?
- Could resources be shifted toward higher-margin work?
- Is a profitable offering being overlooked because it produces less total revenue?
These conversations can help clients recognize that growth does not always mean selling more of everything. In some cases, a stronger business comes from selling more of the right thing.
Helping a client understand that distinction is one of the ways an accounting professional can move beyond reporting the numbers and become a trusted business advisor.
Universal Accounting Center helps accounting professionals develop the technical, advisory, and business-building skills needed to serve clients at a higher level. Call 435-344-2060 to meet with our team and take your next step toward building the premier accounting firm in your area—with these lessons in mind.
