The commercial margin (or gross profit from trading) represents the difference between the selling price of goods and their purchase or production cost, before general operating expenses. It is the primary profitability metric for trading, distribution and retail businesses, expressed either in absolute terms or as a percentage of revenue (gross margin rate). In financial due diligence, the trend, composition and sustainability of the commercial margin is analysed in detail: pricing power, supplier terms, product mix evolution and volume effects are decomposed to understand the structural versus cyclical drivers.

‍

Example: a Swiss food distributor reports a commercial margin of 28% (CHF 8.4 million on CHF 30.0 million revenue). Due diligence reveals that margin erosion from 31% to 28% over three years is driven by the loss of two premium product lines and increasing competition from online platforms — a structural deterioration that reduces the normalised EBITDA and the defensible valuation versus the seller's business plan.

‍

Hectelion analyses commercial margin trends and their drivers as a core component of every quality of earnings review.