Gross Margin
In one sentenceThe percentage of revenue left after paying the direct costs of delivering your product or service.
What it means
Gross margin shows how profitable your core offer is before overhead. Software companies often have high gross margins; service businesses and physical products usually lower ones.
How to use it
- Know the gross margin for each offer. Push the high-margin ones.
- Use it to set budgets: a 50 percent margin means you keep 50 cents of each dollar to pay for marketing, overhead and profit.
FormulaGross margin = (revenue − COGS) ÷ revenue × 100%
Example: ($100,000 − $40,000) ÷ $100,000 = 60%
Example: ($100,000 − $40,000) ÷ $100,000 = 60%
Related terms
Net Margin COGS Unit Economics ROAS
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