Definition
The percentage of revenue remaining after subtracting the direct cost of delivering the product.
Formula
(Revenue - Cost of Goods Sold) / Revenue x 100
How to measure
Subtract direct delivery costs, like hosting and support, from total revenue, then divide by revenue and multiply by 100.
Why track it
Gross margin shows how much revenue is available to fund sales, marketing, and overhead after serving each customer.
Example
A company with $500,000 revenue and $100,000 in direct delivery costs reports an 80% gross margin.
FAQ
- What is Gross Margin?
- The percentage of revenue remaining after subtracting the direct cost of delivering the product.
- How do you calculate Gross Margin?
- (Revenue - Cost of Goods Sold) / Revenue x 100
- Why track Gross Margin?
- Gross margin shows how much revenue is available to fund sales, marketing, and overhead after serving each customer.