◈ GLOSSARY · BUSINESS & ENTREPRENEURSHIP
Gross Margin.
A definition, in plain English — with the books that teach it.
ClearValue Books · reviewed against sources ·
◈ DEFINITION
What it means
Definition
Gross margin is revenue minus cost of goods sold (COGS), divided by revenue. It tells you how much of every dollar of sales is left after covering the direct cost of producing what you sold — before any overhead, marketing, or salaries. Software businesses typically run 70–90%; grocery stores run 20–30%. A falling gross margin is usually the first sign something is wrong.
◈ IN PRACTICE
Example
A SaaS company has $10M in revenue and $1.5M in COGS (hosting, payment processing, customer support). Gross margin = ($10M − $1.5M) / $10M = 85%.
◈ RECOMMENDED READING
