Revenue minus the direct cost of delivering it, expressed as a percentage of revenue. The clearest single reading of whether a business model works, provided you know what was counted as a direct cost.
Gross margin looks like arithmetic and behaves like policy. Which costs sit above the line is a choice, and every comparison across companies inherits each company's choice.
Last reviewed 3 July 2026 · Free and ungated
One client brief puts the unit economics beneath a pricing or investment case in front of selected senior operators before it is approved.
Pressure-test this decisionGross margin is revenue less cost of sales, the costs directly attributable to delivering the product or service, expressed as a percentage of revenue. A 70 per cent gross margin means seventy cents of every revenue euro remain to cover everything else: sales, development, administration and, eventually, profit.
Gross margin is the fastest test of a scalability claim. A business whose margin holds or improves as volume grows has a model where growth funds itself; one whose margin erodes with each new cohort of customers is buying its revenue. In pricing decisions the margin shows how much room a discount actually has: at 30 per cent gross margin, a 10 per cent price cut needs roughly a 50 per cent volume increase just to stand still, arithmetic that rarely accompanies the discount proposal.