Gross Margin
Definition
Gross margin is revenue minus cost of goods sold, expressed as a percentage. Shows how much profit you keep after delivering your product or service.
Extended Definition
Formula: Gross Margin = ((Revenue - COGS) / Revenue) x 100. Example: $100k revenue, $30k COGS, gross margin is 70%. SaaS typically has 80-90% gross margins. E-commerce often 30-50%. Services 40-60%. High gross margin means you can spend more on sales and marketing while staying profitable. Low margin means you need high volume to survive.
Related Terms
Contribution Margin
Contribution margin is revenue per customer minus variable costs (COGS). Shows how much each sale contributes to covering fixed costs and profit.
Unit Economics
Unit economics measures profitability per customer. It's the revenue one customer generates (LTV) minus the cost to acquire and serve them (CAC + COGS). Positive unit economics = you make money on each customer.