What is Gross Profit Margin?
Share of revenue left after direct costs of goods sold.
How to calculate it
Calculate Gross Profit Margin as: (Revenue − COGS) / Revenue × 100. Pull the inputs from your connected data and track the trend over time in your dashboard.
Examples
Example 1
$1M revenue with $200k COGS -> 80% gross margin, typical for SaaS.
Example 2
A SaaS company with $2M revenue and $300k in hosting and support COGS has an 85% gross margin, leaving ample room to fund growth.
Why it matters
Gross profit margin is the share of revenue left after the direct cost of goods sold and shows core product profitability before operating costs. It reveals how much each sale contributes toward covering overhead and generating profit, and it sets the ceiling on every downstream margin. Consistent classification of what belongs in COGS is essential for the figure to be comparable over time.
Benchmark context
Software typically runs 70-90%; retail and hardware sit around 20-40%. Compare within your industry, since structurally different cost bases make cross-sector comparison meaningless.
Common pitfalls
Inconsistent classification of costs in COGS.
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