Gross profit margin only accounts for the direct costs of producing goods or services (COGS), while net profit margin subtracts all expenses including overhead, taxes, and interest. Gross margin shows production efficiency, while net margin shows overall profitability.

Healthy gross margins vary by industry: software companies often see 70-90%, retail businesses typically achieve 25-50%, and manufacturing usually ranges from 20-35%. Compare your margin to industry benchmarks rather than using a universal standard.

You can improve gross margin by negotiating better supplier prices, reducing production waste, optimizing your product mix toward higher-margin items, or raising prices. Even small improvements in gross margin compound significantly as revenue scales.