# Weighted Average Gross Margin

This weighted average gross margin calculator will help you to estimate the average gross margin of your business for use in the Financial Projections Template.

Generally a business will have a number of product lines and know the gross margin on each. Accordingly to calculate the weighted average gross margin for the business it is necessary to weight each product gross margin by its corresponding revenue.

## How to Calculate Weighted Average

As an illustration, suppose a business has annual sales revenue of 500,000 from two products A and B. Product A has a gross margin (GM%) of 50% and annual sales revenue of 100,000. Product B has a gross margin of 30% and annual sales revenue of 400,000. In this instance the calculation of the weighted average gross margin (WAGM) is as follows.

```WAGM = (GM% A x Revenue A + GM% B x Revenue B)/ Revenue
WAGM = (50% x 100,000 + 30% x 400,000) / 500,000
WAGM = 34%```

As can be seen each products’ margin is weighted by its corresponding revenue. This result is then divided by the total revenue of the business. In this case with a simple two product business the weighted margin is 34%.

In similar fashion the Excel sheet, available for download below, helps a business calculate the weighted average gross margin by entering gross margins and revenue for up to ten product lines.