Gross Margin
The share of revenue left after the direct cost of delivering your product (cost of goods sold).
How it's calculated
Gross margin = (revenue − COGS) ÷ revenue
Why it matters
High margins (software) fund growth; thin margins (physical) demand volume and discipline.
Related terms
Customer Acquisition Cost (CAC)
What it costs, all-in, to win one new customer — ads, sales salaries, tools, the works.
Lifetime Value (LTV)
The total gross profit you expect from a customer across their whole relationship with you.
CAC Payback Period
How many months of a customer's payments it takes to earn back what you spent acquiring them.
Contribution Margin
What each sale contributes to fixed costs and profit after all the variable costs of that sale.