How to Calculate Gross Margin

Get more valuable accounting tips here: blog.ignitespot.com

Figure out how to calculate your gross margin in 60 seconds!

Let's pretend you sell blender bottles and fancy beard oil. Maybe you cater to athletic lumberjacks. I don't know. It could happen. We have a total sale of $100,000 for the blender bottle and one $150,000 for the beard oil. Total sales for the month are 250,000 dollars. To costs: $10,000 for the oil and $17,500 for your blender bottle. Meaning that you have $27,500 in total costs. If you subtract your costs from your sales, you have $222,500 in what we call gross profit. Now, to figure out your gross margin, this is easy, you take your gross profit, $222,500, and you divide it by your total sales of $250,000. Now that gives you a percentage. In this case it's 89%.

So what does that 89% mean? Well, for every dollar you sell in products, you get to keep 89 cents of that, to essentially pay for your business. See you next week!

And that's it! That is how easy it is to figure out your gross margin!

Find this video helpful? Be sure to subscribe to our channel to get more awesome profitable business and accounting tips: youtube.com/user/watchignitespot

youtu.be/WQdrdmHRI9A