Gross Margin
What does a sale leave behind to pay for everything that is not the sale?
The idea
Gross margin shows what remains after direct delivery costs.
In the real world
A $100 sale with $40 direct cost has $60 gross profit.
Going deeper
Gross margin is what a sale leaves behind after the direct cost of delivering it, and it is the money that has to fund absolutely everything else: acquisition, support, overheads and eventually profit.
That makes it the ceiling on what you can afford to spend winning a customer. A business keeping £60 of every £100 can spend £30 acquiring a customer and still be ahead; one keeping £15 is behind before overheads are counted. Two businesses with identical revenue and identical marketing spend can therefore be in completely different positions, and the difference is not visible in the revenue line.
Where it stops applying
Gross margin says nothing about whether the business is profitable — a high margin with bloated overheads still loses money. It bounds what is possible, it does not describe what is happening.
Why it matters
It sets the ceiling on how much you can afford to spend acquiring and supporting a customer.
Try this today
Calculate gross margin for one offer.
Test yourself
Two businesses both bill £100. One keeps £60 after direct costs, the other keeps £15. Both spend £30 acquiring a customer. What is the difference?
Show the answer
The first has £30 left to fund the rest of the company; the second is £15 down before overheads. Gross margin determines what acquisition and support you can afford, so the same spend is an investment in one and a loss in the other.
Learn this in the feed Answering from memory, then again days later, is what makes it stick.