Gross profit margin and contribution margin are incredibly important business metrics you should constantly monitor. They provide valuable snapshots on your business' health, each from a different angle so that neither is a substitute for the other. The primary difference between gross profit and contribution margin is that contribution margin is a profit metric zoomed in on individual products while gross profit highlights your business as a whole. Gross profit margin is a measure of remaining revenue after subtracting costs directly associated with production from your total revenue. The production costs used to calculate gross profit margin are referred to as the cost of goods sold (COGS). Here's an example of how to calculate gross profit margin: Gross profit margin = total revenue - COGS If the total revenue for your business is $10 million and your COGS is $6 million, your business' gross profit margin is $4 million or 40%. This metric highlights how successful your overall business is in generating revenue from the costs spent on producing all products in your portfolio.