finance
Gross Margin
Gross profit as a percentage of revenue. The product profitability ratio.
Definition
Gross margin is gross profit divided by revenue, expressed as a percentage. It measures product-level profitability before any overhead. Gross margin matters because it sets the ceiling on what overhead you can afford: a 70% gross margin business can fund a much bigger team than a 25% gross margin business at the same revenue. Service businesses typically run 40-70%; SaaS 70-90%; retail and grocery 20-30%; manufacturing 15-35%. Below industry benchmark = structural pricing or efficiency problem.
In your business
- →Calculate per project AND aggregated monthly
- →Track per service line - some are silent losers
- →Trending margin matters more than absolute - declining margins signal trouble even at healthy levels