Gross margin is the percentage of sales revenue remaining after subtracting the direct cost of the product or service sold. The formula is gross profit divided by revenue, multiplied by 100. It measures the share of each sale available to cover operating expenses and profit.
What Gross margin controls in practice
Gross margin belongs in the cost input, pricing rule, approval and customer-facing amount. Give it a named pricing owner, a source document and a clear handoff. Otherwise a quote can pass approval while missing the margin or cost assumption that justified it.
| Checkpoint | What the record should show |
|---|---|
| Inputs | Identify cost, quantity, currency and customer conditions |
| Rule | Show the formula, threshold or agreed price source |
| Exception | Name the approver when the result falls outside policy |
| Output | Carry the approved amount and assumptions into the quotation |
Related terms and distinctions
- Markup: Markup is the amount added to the cost of a product or service to determine its selling price.
- Price floor: A price floor is the minimum selling price a business permits for a product, service, or transaction without additional approval.
The boundary worth keeping clear
The definition matters because nearby terms can describe a different document, event or responsibility. Use Gross margin only when the record matches the conditions above. A familiar label attached to the wrong stage creates cleaner-looking data and worse decisions. That discipline also makes reports comparable across teams, systems and reporting periods.
The trade-off
More controls add work at the start. That cost is visible. The cost of weak records arrives later as rework, delayed approval, margin leakage, a payment investigation or a delivery dispute. Set the control depth according to the amount, risk and reversibility of the decision.
Related Quotable resources
Continue with Markup, quote software and Price floor. These pages cover the commercial workflow and the records that connect Gross margin to the next transaction step.
