As a leader, financial fluency strengthens your ability to contribute to conversations across the organization.
Leaders move into their roles with all kinds of experiences, backgrounds, and skill sets that shape the approaches they take and contributions they make. That’s why, for some leaders, financial fluency comes easy. But, for others, it must be learned and developed.
Regardless of your background, or what type of leadership role you’re in, finances are a core part of managing resources and making the right decisions. Having a solid understanding of financial principles is critical to help you navigate challenges and avoid over-reliance on others when it comes to finance-related tasks.
While no two companies have identical financial processes or platforms, the industry does share common terminology and foundational finance-related concepts to support effective communication and collaboration.
It’s also important to note that finance goes beyond managing costs and pricing to include strategies that optimize efficiencies, drive revenue, allocate labor effectively, and enhance performance. As a leader, financial fluency strengthens your ability to contribute to conversations across the organization.
This was one of the topics we focused on in-depth during our first-ever Excellence in Business Operations (XBO) Experience event last year, and it’s on the agenda for XBO again this year. Why? Because leaders can never know too much about revenue, profits, and the numbers that drive success.
During last year’s Financial Literacy: Approach Problems with Confidence session during XBO, one thing our finance keynotes emphasized was this: All leaders should understand the difference between markup and margin.
Markup vs. Margin: What’s the Difference?
Understanding the difference between markup and margin directly impacts your profitability, pricing, and business longevity. Misinterpreting or misusing these terms can lead to:
- Underpricing (which impacts profitability)
- Overpricing (which impacts competitiveness)
- Misaligned project budgets
- Inaccurate revenue projections
- Strained vendor relationships
- Cashflow challenges
- Reduced operational efficiency
- Undervaluation of services
So, what’s the difference between the two?
Markup represents the percentage added to the original cost of a product or service to create the final selling price. For example, a $75 product that is sold for $120 has a 60% markup.
Margin represents the portion of the selling price that is profit. For example, the $45 profit on the $120 sale mentioned above reflects a margin of 37.5%.
With a better understanding of these two terms, you can better assess profitability and be more strategic with pricing in situations like:
- Crafting proposals that include strategic pricing to ensure profitability while remaining competitive
- Applying client discounts based on their impact on margin and long-term gains
- Bundling solutions to maintain healthy margins
- Negotiating with vendors to evaluate the impact of supplier discounts and how they impact your own pricing
- Allocating labor, equipment, and resources to support profitability goals
- Structuring agreements to maintain profitability and encourage repeat business
Level Up Your Financial Fluency at XBO Experience 2025
Financial literacy is a leadership skill that, once you hone it, empowers you to make powerful decisions and drive organizational success. Leaders at all levels should take steps to enhance their understanding of financial concepts so they can confidently contribute to business initiatives.
Whether you’re a leader in HR, IT, operations, marketing, sales, or something else, building a strong financial foundation will make data-driven decisions that positively impact growth and profitability.
A great way to enrich your leadership journey is by attending our annual XBO Experience event. It’s a critical step for young professionals who are ready to unlock their full leadership potential.
