Skill: 1kalin/afrexai-margin-analysis (version 1.0.0)

# Margin Analysis & Profit Optimization Analyze gross, operating, and net margins by product line, customer segment, and channel. Identify margin erosion patterns and build pricing power. ## When to Use - Quarterly margin reviews - Pricing decisions (new product, discount approval, bundle strategy) - Cost structure changes (new vendor, headcount, infrastructure) - Board prep or investor reporting - Post-acquisition integration (blended margin modeling) ## Framework ### Step 1: Margin Stack (Top → Bottom) Break revenue into layers. For each product/service line: | Layer | Formula | Healthy Range | |-------|---------|--------------| | Gross Margin | (Revenue - COGS) / Revenue | 60-80% (SaaS), 30-50% (services), 20-40% (manufacturing) | | Contribution Margin | (Revenue - Variable Costs) / Revenue | 40-70% | | Operating Margin | EBIT / Revenue | 15-30% (mature), -20-10% (growth) | | Net Margin | Net Income / Revenue | 10-25% (healthy), varies by stage | ### Step 2: Margin by Segment Split margins across: - **Product lines** — which products subsidize others? - **Customer tiers** — enterprise vs mid-market vs SMB - **Channels** — direct sales vs partner vs self-serve - **Geography** — domestic vs international (FX, compliance costs) ### Step 3: Erosion Detection Flag these patterns: - Gross margin declining >2% QoQ without volume increase - Discount frequency increasing (>30% of deals discounted) - Customer acquisition cost (CAC) growing faster than LTV - Support costs per customer rising (hidden COGS) - Infrastructure costs scaling faster than revenue ### Step 4: Pricing Power Assessment Score 1-5 on each: 1. **Switching costs** — how hard is it to leave? 2. **Differentiation** — can customers get this elsewhere? 3. **Value quantification** — can you prove $ ROI? 4. **Market position** — leader, challenger, or commodity? 5. **Contract structure** — annual, multi-year, usage-based? Total 20+ = strong pricing power. Below 12 = commodity risk. ### Step 5: Optimization Levers **Revenue side:** - Price increase (1% price increase = 8-12% profit increase for most businesses) - Upsell/cross-sell (expansion revenue at near-zero marginal cost) - Usage-based pricing tiers (capture value from power users) - Annual prepay discounts (improve cash flow, lock retention) **Cost side:** - Vendor renegotiation (benchmark against 3+ alternatives) - Infrastructure right-sizing (cloud cost audits save 20-40%) - Automation of manual processes (support, onboarding, billing) - Headcount-to-revenue ratio optimization ### Step 6: Scenario Modeling Build three scenarios for next 4 quarters: | Scenario | Revenue Growth | Margin Change | Action | |----------|---------------|---------------|--------| | Base | Current trajectory | Flat | Maintain | | Bull | +20% growth | +3-5% margin | Invest in scaling | | Bear | -10% decline | -5-8% margin | Cut to protect cash | For each: model cash runway, breakeven timeline, and hiring capacity. ## 2026 Benchmarks by Industry | Industry | Gross Margin | Operating Margin | Net Margin | |----------|-------------|-----------------|------------| | SaaS (B2B) | 70-85% | 15-30% | 10-25% | | Professional Services | 50-70% | 15-25% | 10-20% | | Fintech | 60-75% | 10-25% | 8-20% | | Healthcare Tech | 55-70% | 10-20% | 5-15% | | Manufacturing | 25-45% | 8-15% | 5-12% | | E-commerce | 30-50% | 5-15% | 3-10% | | Construction Tech | 35-55% | 10-20% | 5-12% | | Legal Tech | 65-80% | 20-35% | 15-25% | | Real Estate Tech | 40-60% | 10-20% | 5-15% | | Recruitment Tech | 55-70% | 12-22% | 8-18% | ## Red Flags - Gross margin below industry median for 2+ quarters - Negative contribution margin on any product (you're paying customers to use it) - Operating margin declining while revenue grows (scaling inefficiency) - Net margin negative with no clear path to breakeven - Customer concentration >30% of revenue from top 3 accounts ## Output Template ``` MARGIN ANALYSIS — [Company/Division] — [Period] Revenue: $X | Gross Margin: X% | Operating Margin: X% | Net Margin: X% QoQ Trend: [improving/flat/declining] vs Industry Benchmark: [above/at/below] by X% TOP 3 FINDINGS: 1. [Finding + $ impact] 2. [Finding + $ impact] 3. [Finding + $ impact] RECOMMENDATIONS: 1. [Action] → Expected margin impact: +X% 2. [Action] → Expected margin impact: +X% 3. [Action] → Expected margin impact: +X% 90-DAY PRIORITY: [Single highest-leverage action] ``` ## Resources - [AI Revenue Leak Calculator](https://afrexai-cto.github.io/ai-revenue-calculator/) — find where margins are eroding - [Industry Context Packs](https://afrexai-cto.github.io/context-packs/) ($47) — vertical-specific margin benchmarks and optimization playbooks - [Agent Setup Wizard](https://afrexai-cto.github.io/agent-setup/) — automate margin monitoring with AI agents


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