<p><strong>Summary</strong> </p><p>Stephen Brown, COO at LedgerGurus and host of the Ecommerce Finance Podcast, sits down with Stacy Walker, Director of Growth at LedgerGurus. They break down the four margins every ecommerce brand should be tracking and why most 7- and 8-figure sellers only understand one of them. The conversation focuses on why founders feel profitable but still struggle with cash and confidence in their numbers. </p><p>This episode explains gross margin, contribution margin, net operating margin, and net profit margin in plain language. Stephen and Stacy walk through what each margin actually tells you, where brands get them wrong, and how bad data hides real problems. Listeners walk away knowing which margin points to pricing issues, ad efficiency problems, or bloated overhead. </p><p><strong>Key Takeaways</strong> </p><ul><li>Gross margin isolates product and inventory costs, so you can see pricing and supply chain pressure early. </li></ul><ul><li>Bad inventory data makes gross margin look fine, while profit quietly erodes. </li></ul><ul><li>Contribution margin shows what is left after selling costs and determines how much room you have to operate. </li></ul><ul><li>Low contribution margin leaves no buffer for payroll, software, or growth mistakes. </li></ul><ul><li>Advertising efficiency is often the biggest driver of contribution margin swings. </li></ul><ul><li>Net operating margin reveals whether overhead is sustainable as the business grows. </li></ul><ul><li>Payroll is usually the largest hidden drain on operating margin. </li></ul><ul><li>Net profit margin can hide problems when debt, taxes, or owner expenses are mixed into operations. </li></ul><p> </p><p><strong>Chapters</strong> </p><p>00:00 Understanding Financial Margins in Ecommerce </p><p>02:41 The Importance of Accurate Profitability Tracking </p><p>05:36 Gross Margin: Definition and Common Misunderstandings </p><p>08:16 The Impact of Cost of Goods Sold on Profitability </p><p>10:55 Inventory Management and Its Financial Implications </p><p>13:48 Contribution Margin: What It Is and Why It Matters </p><p>16:38 Balancing Gross and Contribution Margins </p><p>19:26 The Role of Advertising in Contribution Margin </p><p>22:16 Operational Efficiency and Financial Health </p><p>25:44 Understanding Net Operating Margin </p><p>33:15 The Importance of Debt Management </p><p>39:10 Decoding Profit Margins </p><p>46:45 Cash Flow vs. Profitability </p><p>48:27 Scrutinizing Fixed Expenses </p><p>50:46 Final Thoughts on COGS Management </p><p> </p><p><strong>Guest Info</strong> </p><p><a target="_blank" rel="noreferrer noopener" class="Hyperlink SCXW152223160 BCX0" href="https://www.linkedin.com/in/stacy-walker-a88949193/"><strong>Stacy Walker on LinkedIn</strong></a> </p><p></p><p>If you want clarity on which margin is actually hurting your business, our CFO advisory team helps ecommerce founders turn messy numbers into clear decisions. </p><p><a target="_blank" rel="noopener noreferrer nofollow" href="https://ledgergurus.com/ecommerce-accounting-services/?utm_source=RSS&amp;utm_medium=podcast&amp;utm_campaign=e24">https://ledgergurus.com/ecommerce-accounting-services/?utm_source=RSS&amp;utm_medium=podcast&amp;utm_campaign=e24</a> </p>