Course · Act I: How a Business Works · Chapter 5
Gross margin and business models
How different business models make money, what gross margin tells you, and why investors prize recurring revenue such as subscriptions.
Key terms
- Gross margin
- (Revenue − Cost of goods sold) ÷ Revenue. How much of each sales dollar is left after paying for the product.
- Recurring revenue
- Revenue that renews by itself, like subscriptions. It’s valued highly because it’s predictable.
“Business Models & Margins” is part of the full course: 5 puzzles on gross margin and business models, with a story that carries through all five acts. Try this act’s free chapter, “Revenue, Costs, Profit”, first.