Gross Margin: The Number That Can Make or Break Your Business

If you’re serious about growing your business, there’s one number you must understand and track consistently: Gross margin.

This isn’t just accounting jargon—it’s one of the clearest indicators of your business’s

• Health,
• Efficiency,
• Long-term profitability.

What is Gross Margin?
Gross margin is the percentage of revenue left after covering the direct costs of delivering your product or service—things like materials, stock, and direct labour.

Formula:
(Revenue – Cost of Goods Sold) ÷ Revenue = Gross Margin %

Example:
If you sell something for £1,000 and it costs you £600 to deliver, your gross margin is 40%.

This number tells you how much is left to cover overheads, reinvest in growth, and generate profit.

Why Gross Margin Matters
Think of gross margin as your performance dashboard.

It shows:
• ✅ How efficiently you’re operating
• 📈 How scalable your business is
• 💰 How much room you have for reinvestment
• 🚀 How fast you can grow without risking profitability
⚠️ Low gross margins mean you have to work harder to make the same profit.

A business with 25% margin must sell twice as much as one with 50%—just to break even.

What Should Your Gross Margin Be?
No single target fits all, but here’s a simple guide:

• Below 30% – You’re likely under pressure. Time to review your pricing or reduce costs.

• 30–50% – Sustainable, but with room to grow.

• 50%+ – Strong, scalable, and positioned for profit.

Higher gross margins = more control over your future.

5 Ways to Improve Gross Margin
🟡 1. Raise Your Prices
Even small increases can make a big impact—with the right positioning and value proposition.

🟢 2. Lower Direct Costs
Negotiate with suppliers, reduce waste, improve processes. Every £1 saved adds to your margin.

🔵 3. Optimise Product/Service Mix
Promote your higher margin offers. Know what’s profitable—and focus your energy there.

🟠 4. Systemise Delivery
Streamlined operations = more efficient delivery, lower costs, higher margin.

🔴 5. Review Regularly
Don’t wait for year-end. Review margins monthly or quarterly—especially when scaling or changing pricing.

Gross margin is the fuel in your business tank.

The more you have, the farther you can go.
Start measuring it. Focus on improving it.

It might just be the single most powerful lever for business success.