Gross margin
Revenue remaining after the direct cost of delivery.
Definition
Gross margin is revenue minus cost of goods sold, usually expressed as a percentage of revenue. Cost of goods sold includes only costs that scale directly with delivering the product or service.
Why it matters
Gross margin sets the ceiling on everything else. A business with thirty percent gross margin must run a fundamentally leaner operation than one at eighty percent, regardless of growth rate.
Related terms
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