Gross Profit Margin
What it measures
Gross profit margin is the share of every income dollar that’s left after the direct costs of delivering your product or service. It tells you how much of each dollar is available to cover overhead, taxes and profit.
Gross Profit Margin = (Gross Profit ÷ Income) × 100Why it matters
Gross profit margin is your pricing-and-cost barometer. When it’s healthy and stable, your pricing is right and your costs are under control. When it slides, it usually means costs have crept up (materials, subs, too much overtime) or you’ve taken on lower-priced work.
It’s also one of the biggest reasons an owner can work incredibly hard and still feel like it isn’t amounting to much. When too little of each dollar survives the direct costs, there’s never much left to show for the effort and the fix is in pricing and cost, not more hours.
Want help putting this number to work in your business? That’s exactly the kind of thing we set up together in coaching.