e.g. salaries, rent, utilities — excluding COGS
e.g. interest, tax, one-off items
Gross margin shows how much you keep after covering the direct cost of goods sold. Operating margin strips out a further layer — the day-to-day running costs of the business — and net margin goes one step further again, deducting tax, interest, and one-off items. Each one is always lower than the last, since each subtracts more from revenue. Margin is always expressed as a percentage of revenue, while markup is a percentage of cost — the same £1,000 of profit on a £4,000 cost is a 25% margin but a 33.3% markup, which is a common point of confusion. Switch to reverse mode to work the other way: enter the margin you need to hit and find the price or cost that gets you there.