For the Simple Numbers 100, Profits Are Improving

Revenue is still hard-earned, but entrepreneurs are controlling what they can control.

By Brandon Gray

The economy is still uneven. The “K-shaped” description remains a useful way to think about it: some companies are moving ahead, while others are fighting for traction. But inside the latest Simple Numbers 100 model, one thing is clear: profits are improving.

Over the last three months of rolling 12-month data, February through May, the model posted three consecutive months of profitability improvement, moving from an average gross margin of 15.6 percent to 16.6 percent. That does not mean the economy is booming. It means entrepreneurs are adjusting. They are making small, disciplined moves that are starting to show up in the numbers.

While revenue continues to grow, the gains have been modest. The better story is happening below the revenue line, where non-labor operating expense is declining as a percentage of gross margin. As a result, since December 2025, gross margin 0.8 percentage points as a percentage of gross revenue.

In an inflationary environment, this is not easy. Costs are still real. Tariffs are still creating pressure. Consumer spending is still uneven. But entrepreneurs are finding a way. We are seeing the improvement show up in practical, owner-level decisions:

• Renegotiating direct costs with vendors.
• Protecting and improving pricing where the market allows.
• Focusing harder on the highest-margin products and services.
• Cutting non-essential operating expenses.
• Eliminating spend that feels nice to have but does not clearly support growth, delivery, or profitability.

This is not a “growth fixes everything” environment. It is a “discipline compounds” environment. That is an important shift. In much of 2025, profitability was not making meaningful progress. Now, the model is showing small but real improvement. The entrepreneurs who are adapting are starting to separate from those who are waiting for the market to fix the problem for them.

When we dig deeper into the top 10 performing companies in the model, we see one more driver of profitability. They are getting more output from their teams. In the overall model, total labor efficiency has not changed. The labor efficiency ratio measures the amount of gross margin generated for every dollar spent on labor. Among the top 10 performers, total ratio improved from 2.36 for the rolling 12 months ending last December to 2.52 for the rolling 12 months ending in May. The best are not just cutting costs. They are building more productive businesses.

Revenue may be harder to generate right now. That means owners have to control what they can control: Review pricing, vendor costs, direct labor, job costing, and product/service mix. If a recurring expense is not essential, not producing a return, or not supporting the customer experience, challenge it. Increase team output. The best companies are finding ways to generate more gross margin with the labor they already have. Small improvements in the right numbers can create meaningful profit growth.

For 21 Hats subscribers, we are offering a free Simple Start consulting call to help you identify which of these levers can move profit in your business. If you want help finding the fastest path to better margins, tighter operating expenses, and stronger team output, email me at brandon.gray@simplenumberscri.com, and we will take a look.

Brandon Gray is a partner with CRI Simple Numbers.