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Get startedGross margin
Profit left after the cost of goods, as a percentage of revenue.
Gross margin is revenue minus cost of goods sold (COGS), divided by revenue. It sets the ceiling on your profitability — everything else (ads, fees, overhead) comes out of it. A high gross margin gives you room to spend on growth; a thin one doesn't.
Formula
Gross margin = (Revenue − COGS) ÷ Revenue × 100
Example: $100 revenue − $60 COGS = $40 (40% gross margin).
What a good result depends on
Varies by category; the key is enough headroom to fund ads and overhead.
Common mistakes
- Confusing margin with markup — a 67% markup is a 40% margin.
- Judging overall health on gross margin alone.