What is a good gross margin?
Gross margin is the share of each sale you keep after the direct cost of delivering it. It's the single best early signal of whether a business can actually fund itself.
Skip the math — the free product pricing calculator runs this from your own figures.
Open the free calculator →How to calculate it
Gross margin is revenue minus the cost of goods sold, divided by revenue, shown as a percentage. If you sell something for $100 and it costs you $40 to make and deliver, your gross margin is 60%.
'Cost of goods sold' means the direct costs — materials, the labor that makes the product, payment and platform fees — not your rent or marketing. Those come out of the margin later.
Healthy benchmarks by business type
Margins vary enormously by model. Physical products and retail often run 30–50%. Service businesses commonly sit around 50–70%, since their main cost is people's time. Software and digital products can reach 80–95%, because copies cost almost nothing.
The right target is 'high enough to cover all your overhead and still leave profit' — so compare yourself to your own model, not to a business that works completely differently.
Why fees and overhead quietly erode it
A margin that looks healthy on paper can shrink fast once payment processing, marketplace commissions, discounts, and returns are counted. These are easy to forget when you set a price and painful to discover at year-end.
Build them into your cost base so the margin you see is the margin you actually keep.
How to improve it
Two levers move gross margin: raise price or lower direct cost. Raising price — even modestly, and especially on your best products — is usually the faster win because it drops straight to the bottom line. Cutting cost helps too, as long as it doesn't cut quality.
The free pricing calculator below shows the price you'd need to hit a target margin after your real costs and fees, so you can set it deliberately.
Questions
What's the difference between gross margin and net margin?
Gross margin is what's left after the direct cost of delivering a sale. Net margin is what's left after everything — overhead, marketing, salaries, taxes. Gross margin tells you if the product works; net margin tells you if the business does.
Is a higher gross margin always better?
Generally yes, but not if you priced so high that few people buy. The goal is the best combination of margin and volume — which is why you sanity-check a margin-based price against what the market will actually pay.