finance
Gross Profit
Revenue minus direct cost of goods sold. Measures how profitable the product or service is before overhead.
Definition
Gross profit is revenue minus COGS (direct cost of goods sold). It tells the whole story of the underlying business model: is the thing you sell actually profitable on its own? A business at 20% gross margin needs huge volume to cover overhead, while a 70% margin business can fund team, marketing and infrastructure from the product itself. Compare gross margin within an industry, not across industries. Retail and grocery run 20-30%, professional services 50-80%, SaaS typically 70-90%. A trending-down gross margin signals a problem: rising input costs, price pressure, or worsening product mix. Improving gross margin is usually the single biggest lever on overall profitability.
In your business
- →Calculate per project AND aggregated monthly
- →Track per service line - some are silent losers
- →If declining, audit pricing and cost discipline before scaling marketing