What is a good gross profit margin?
It varies significantly by industry. Software/SaaS: 70–90%. Professional services: 50–70%. Manufacturing: 25–50%. Retail: 20–40%. Restaurants: 60–70% (before labor and overhead). Always benchmark against your specific industry, not a universal number.
What is the difference between gross profit and net profit?
Gross profit is revenue minus the direct cost of goods sold (COGS). Net profit deducts all additional expenses: operating costs, salaries, rent, marketing, interest, and taxes. Gross margin tells you about production efficiency; net margin tells you about overall profitability.
For products: raw materials, manufacturing labor, shipping to customer. For services: direct labor hours, contractor fees, direct project costs. Excluded: rent, admin salaries, marketing, software subscriptions — those are operating expenses.
How can I improve my gross profit margin?
Three main levers: (1) raise prices — even 5% can significantly improve margin, (2) reduce COGS through supplier negotiations or process improvements, (3) shift your product/service mix toward higher-margin offerings.