The percentage of revenue remaining after subtracting the direct cost of goods sold.
Gross margin answers: after paying for the products you sell, what percentage of the sale price is left? If you buy a product for £6 and sell it for £10, your gross margin is 40%. That 40% needs to cover your rent, staff, marketing, and everything else.
Gross Margin % = ((Revenue − COGS) ÷ Revenue) × 100Gross margin is the foundation of your business model. If your gross margin is 15%, you have very little room to absorb operating costs. If it's 60%, you have breathing room. Gross margin varies enormously by industry — knowing yours tells you whether your pricing model is sustainable.
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An ecommerce seller finds their overall gross margin is 28%. AskBiz breaks this down: their own-brand products average 52% margin while resale products average only 11%. AskBiz recommends shifting the product mix toward own-brand to improve overall margin.
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No. Gross profit is a money amount (e.g. £12,000). Gross margin is a percentage (e.g. 40%). Gross profit ÷ Revenue = Gross margin. Both are useful — gross profit for absolute size, margin for comparing products or businesses.