What is gross margin and why should a PM know it?

Gross margin — this is the difference between sales revenue and the cost of goods sold. It shows how much money remains after covering direct costs of production or procurement of the product.

Formula:

Gross Margin = Revenue - Cost of Goods Sold (COGS)

Or as a percentage:

Gross Margin % = ((Revenue - COGS) / Revenue) * 100%

Why PM should know gross margin:

• It helps assess the profitability of a product or project.
• It allows making decisions about pricing, cost optimization, and product development.
• It influences development strategy and priorities.
• It helps understand how efficiently resources are used.

Example: if the gross margin is low, it may be worth reviewing suppliers or increasing the price to improve profitability.