Glossary
Margin
The difference between the selling price and the cost of a product or service. It shows how much the company retains after covering costs.
What is margin
Margin is the difference between the price at which you sell a product or service and how much it costs to produce or deliver it. Expressed as a percentage, it indicates the share of each euro of revenue that remains after covering costs.
Basic formula:
Margin (%) = (Selling price – Cost) / Selling price × 100
Gross, operating, and net margin
There are different levels of margin, depending on which costs are considered:
| Type | What it subtracts from revenue | What it's for |
|---|---|---|
| Gross margin | Direct costs only (materials, labor) | Understanding the product's basic profitability |
| Operating margin | Direct costs + operating expenses (rent, indirect staff) | Understanding how much the business earns net of current expenses |
| Net margin | All costs, including taxes and financial charges | The bottom line: what's truly left |
Why it matters for a business
Knowing the margin per product or per client is the first step toward understanding where the money goes and calculating the true cost of a product. Without this data, decisions on pricing, discounts, and investments are based on gut feeling.
Margin is one of the 5 numbers to check every week to keep the business under control.
Learn more: Contribution margin | Full costing