What is Gross Margin? [Hint: Financial Control]

Jalil Rahman

17d (edited) • 1 Minute MBA (Fashion Edition)

Gross Margin is where your business actually starts to make money.

Definition

Gross margin = (Revenue − Cost of Goods) ÷ Revenue

If you sell a product for £100 and it costs £40 to make, your gross margin is 60%.

Why it matters

Gross margin is what funds everything:

Marketing
Team
Rent
Growth

So if your margin is too low, your business has no oxygen.

What most people miss

Too many brands focus on revenue instead of margin. But revenue doe not equal profit. You can scale fast and still lose money. (This is exactly what we covered in Part 1)

Bottom line

Strong brands protect margin first because margin gives you control.

Discussion

Do you know your gross margin by product or just overall?
Which products in your range are weakening your margin?
Where are your biggest cost pressures right now (production, logistics, discounting)?

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