In this episode of Find Your Source, Stephen Peterson dives deep into Cost of Goods Sold (COGS) and how manufacturers can sharpen their financial edge by truly understanding and benchmarking their costs.

Stephen explains the three key components of COGS—direct materials, direct labor, and overhead—and stresses the importance of categorizing them correctly to avoid overstating profits or underestimating waste. From raw materials and freight to production labor, utilities, and factory overhead, he breaks down where costs can hide and how they should be tracked.

But knowing your numbers is only the beginning. Stephen emphasizes:

• Benchmark against industry best practices to uncover inefficiencies.

• Build strong, detailed budgets for COGS and track them against actuals.

• Focus on the low-hanging fruit first—big-ticket items and obvious waste—before chasing pennies.

• Continuously improve over time rather than expecting perfection right away.

• Involve stakeholders and your CPA to ensure accuracy, compliance, and long-term credibility.

He warns against cutting corners, noting that buyers in mergers and acquisitions will uncover missing costs and adjust valuations accordingly. Instead, businesses should aim to create a transparent, efficient, and scalable cost structure that not only drives profitability but also makes them more attractive to investors and buyers.

Stephen closes with encouragement: start where you are, improve piece by piece, don’t get discouraged, and remember that small consistent improvements compound into big results.

📬 Questions or ready to take your next step? Visit the “Work With Me” tab at findyoursource.pro to connect with Stephen directly.