Glossary term
What is Gross margin?
Short answer
Gross margin is the share of revenue left after paying direct job costs, such as crew labor, equipment, fuel and disposal, but before overhead.
Gross margin, explained for tree service owners
Gross margin shows how much of each dollar of job revenue you keep after the direct costs of doing the work. To calculate it, subtract direct costs from revenue, divide by revenue, then multiply by 100. For a tree service, direct costs include crew wages on the job, fuel, equipment use, disposal and any subcontracted work. If your gross margin is thin, you may be pricing too low or losing hours to rework and delays. Compare it by job type, because a stump grind and a storm removal can look very different. Gross margin leaves out office costs, so check net margin too before you judge the whole business.
Related terms
- Net margin
Net margin is the share of total revenue kept as profit after every cost of running the business, including overhead, has been paid.
- Overhead
Overhead is the ongoing cost of running a business that is not tied to one job, such as insurance, office costs, phone plans, software…
- Markup
Markup is the amount added to a job's direct cost to set its selling price, usually shown as a percentage of cost, such as 40 percent…
- Break-even price
Break-even price is the lowest price for a job that covers all of its costs with no profit left over, found by adding direct costs and a…
- Insurance premium
An insurance premium is the price you pay, monthly or yearly, to keep an insurance policy active.
More terms, A to Z
All 199 glossary terms This term in the A-Z list Learn by topic Our services Pricing
Want to know how your company does on this?
Get a free 5-minute audit of your phone, website and Google profile. We check what you can see from the outside, in plain English. No call needed.
Get my free 5-minute audit