Gross Profit Margin

Gross profit margin is one of the most useful single numbers in a small business P&L. It tells you the inherent economics of your business — how efficiently you convert revenue into money available for overhead and profit.

What's a good gross margin?

It depends heavily on the industry. Service businesses can have margins of 60–80%. Contractors typically run 30–50%. Product businesses might be at 20–40%. The number that matters isn't the percentage in isolation — it's whether your gross margin is high enough to cover operating expenses and still generate real net profit.

Margin compression

Gross margins erode when direct costs rise or when pricing doesn't keep pace. Margin compression is one of the most insidious problems in small business because it happens gradually. Tracking gross margin monthly is the only way to catch it early.