Gross margin is a broader term that business owners use to track money spent against money earned. It refers to the percentage of your total revenue that ends up as net income (what’s left when you subtract the direct costs) over a certain time. For example, if your company’s revenue is $100,000 in one quarter and your gross margin is 25 percent, then your net income is $25,000. The higher your gross margin, the more of each dollar in sales you can spend on overhead or keep as profit.