Gross margin is the percentage of revenue left after subtracting the direct costs of delivering your product or service. You calculate it as revenue minus cost of goods sold, divided by revenue. It is the money available to cover acquisition, overhead, and profit.

Gross margin is the multiplier on every other growth decision. High margin means each customer funds a lot for acquisition, and you can afford a higher CAC. A thin margin means you have very little room to spend on winning customers. Know it before you set a marketing budget, because it caps what you can spend.

Example:

 Revenue is $100,000, and the direct cost to deliver is $40,000. Gross margin is (100,000 - 40,000) / 100,000 = 60%.

Why does gross margin matter for marketing?

 It determines how much of each sale is available to acquire the next customer. Higher margin supports a higher affordable CAC and faster payback.

What is the difference between gross margin and net margin?

 Gross margin subtracts only direct delivery costs. Net margin subtracts everything, including overhead, marketing, and taxes.