What is Gross Margin?
How much of every revenue dollar survives after the direct cost of delivering it.
Gross Margin: definition
Gross margin measures how efficiently you turn revenue into profit before overhead. A high, stable gross margin signals pricing power and scalable unit economics; a falling one is an early warning that costs are outrunning prices. It is the first profitability line investors and operators look at.
Gross margin
Gross Margin % = (Revenue − COGS) ÷ Revenue × 100
Gross profit is the dollar figure (Revenue − COGS); gross margin is that figure as a percentage of revenue.
How Fintra handles it
Because Fintra separates COGS from operating expenses at the ledger level and tags costs to products, customers, and jobs, gross margin is a live number - by line, not just company-wide. AI variance detection flags when a product or cohort margin drifts, so you catch a pricing or cost problem in-month rather than at year-end.
Worked example
| Product | Revenue | COGS | Gross margin |
|---|---|---|---|
| Core plan | $600,000 | $120,000 | 80% |
| Services | $250,000 | $175,000 | 30% |
| Hardware | $150,000 | $120,000 | 20% |
Frequently asked questions
What is a good gross margin?
It varies by industry: software often runs 70–85%, services 30–50%, and hardware or retail can be 20–40%. What matters more than the absolute number is whether your margin is stable or improving and whether it covers your operating costs with room for profit.
What is the difference between gross margin and net margin?
Gross margin is revenue minus only COGS, as a percentage of revenue. Net margin subtracts everything - operating expenses, interest, and taxes - so it reflects final profitability. Gross margin measures product economics; net margin measures the whole business.
How do you improve gross margin?
Raise prices, reduce direct costs, shift mix toward higher-margin lines, or improve delivery efficiency. The prerequisite is visibility into margin by product and customer - Fintra provides that by tagging costs at the source so you know where margin actually comes from.
Can I see gross margin by customer in Fintra?
Yes. Because Fintra tags COGS to products, jobs, and customers, it can show gross margin at those granularities rather than only company-wide, letting you spot unprofitable segments and price accordingly.
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