Gross Margin
Also: Gross Profit Margin
The percentage of revenue left after the direct costs of delivering your product or service.
Why it matters
Gross margin shows how much of each euro of revenue is actually available to fund growth, operations, and profit. It is fundamental to every other unit-economic metric, real LTV and payback are calculated on margin, not revenue. High-margin businesses can afford to spend more to grow.
How it is calculated
Gross Margin = (revenue - cost of goods sold) / revenue x 100
What good looks like
Software businesses often run gross margins of 70 to 85 percent or higher, services businesses much lower. The figure matters most for what it tells you about how much room you have to invest in acquisition.
Related terms
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