What is gross margin?
Gross margin is the percentage of revenue remaining after subtracting COGS: Gross Margin = (Revenue − COGS) ÷ Revenue. Gross margin is a primary indicator of pricing power, product scalability and business quality.
Software businesses typically achieve 70–90% gross margins; marketplaces 20–50%; physical-goods commerce 15–40%; hardware 25–50%. Investors apply different valuation multiples to revenue depending on gross margin, so gross-margin discipline is critical for unit economics and exit value.