Gross Margin Analysis

Gross margin = (revenue − cost of goods sold) ÷ revenue × 100. It measures how much of every pound of revenue remains after paying for the products you sold — before overheads, marketing, and other operating costs. A 40% gross margin means you keep £0.40 of every £1 of revenue to cover operating costs and generate profit. Gross margin is the single most important profitability metric for product businesses because it defines the economics of the core business before any management decisions about spending.

Go to Finance → Margin → By Product to see gross margin for each product or SKU. This view immediately reveals: which products are genuinely profitable versus which are margin-dilutive (high revenue but low or negative margin), whether your pricing covers your cost of goods, and which products you should prioritise in marketing and inventory investment. Common surprises: bestselling products are often low-margin; niche products often have the highest margins. Sorting by margin (not revenue) changes most businesses' product priorities significantly.

Different sales channels have different cost structures: Amazon charges referral fees (8–15% of revenue depending on category), eBay charges final value fees, Shopify has lower per-transaction fees but requires marketing investment to drive traffic. Go to Finance → Margin → By Channel to compare your effective gross margin across channels after channel-specific fees. A product with 45% margin on your own website may have only 30% margin on Amazon after fees — this affects which channel deserves more inventory and marketing investment.

The levers for improving gross margin are: Increase prices (the fastest lever, but requires understanding price elasticity — see Pricing Strategy guides), Reduce COGS (negotiate better supplier terms, reduce packaging costs, improve manufacturing efficiency), Shift mix (sell proportionally more of your high-margin products by featuring them more prominently, incentivising them in bundles, or increasing marketing on high-margin SKUs), and Reduce channel fees (qualifying for Amazon's lower-fee tier, or moving some volume to your own website where margins are higher). AskBiz shows you the margin impact of mix shifts in the Scenario Analysis view.