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Profit margin definition for a product or service

Basically, profit is the difference between the revenue obtained from sales of a product or service and the costs of carrying out the work (the formula to calculate is: gross profit = total revenues – costs). The gross profit margin is a percentage value obtained from the relationship between gross profit and total revenue (the formula is: profit margin = gross profit / total revenue).

Let’s take a practical example from the IT area to make it easier: your client needed a software update and let’s say that this service costs R $ 200. And the direct expenses with transportation, license and labor add up, say, R $ 120 – remembering that this list includes, if applicable, expenses with parts, auxiliary materials, food, among other items directly linked to customer service. Doing the math, we reached a profit of R $ 80 on this service.