Profit Margin
Definition
Profit Margin: Profit margin is the percentage of revenue that remains as profit after all expenses. Gross margin subtracts only direct costs, while net margin subtracts all operating expenses. Positive profit margins indicate a sustainable business model.
Example Usage
“Our gross margin is 75%, but after operating expenses, our net margin is -20% as we invest in growth.”
Common Misconceptions
Related Terms
Gross Margin
Gross margin is revenue minus the cost of goods sold (COGS), expressed as a percentage of revenue. For SaaS companies, COGS typically includes hosting...
Revenue
Revenue is the total income generated from selling products or services before any expenses are deducted. For subscription businesses, revenue is ofte...
Unit Economics
Unit economics refers to the direct revenues and costs associated with a single unit of a business (a customer, product, or transaction). Positive uni...
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