Gross Margin Calculator

What is Gross Margin?

Gross margin is the share of revenue left after cost of goods sold (COGS). Boards and investors use it to judge whether recurring revenue can fund S&M, R&D, and payback, and whether unit-economics metrics share one margin definition.

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Formula

Version v1. See methodology and the public formula repo for sources and change history.

Worked example

Using the default example inputs (Revenue: $1,000,000; Cost of goods sold (COGS): $300,000), Gross Margin equals 70% (Gross margin). Healthy gross margin supports CAC payback, LTV, and GTM efficiency metrics that consume the same definition in your board pack.

What good looks like

SaaS gross margins often cluster in the 65–85% range depending on services mix and hosting costs. Track one COGS scope (hosting, support, professional services) period to period; changing definitions moves payback and LTV without a real business change.

Directional guidance only, not a cohort benchmark claim. Premium cohort bands appear when sample thresholds are met for your profile.

FAQ

What is Gross Margin?

Gross margin is the share of revenue left after cost of goods sold (COGS). Boards and investors use it to judge whether recurring revenue can fund S&M, R&D, and payback, and whether unit-economics metrics share one margin definition.

What is the Gross Margin formula?

Gross margin % = (Revenue − COGS) / Revenue × 100

What belongs in COGS for SaaS?

Typically hosting, third-party delivery costs, and customer-support labor tied to delivery, not S&M or R&D. Finance and board decks sometimes disagree; pick one scope and document it.

Gross margin vs EBITDA margin?

Gross margin is revenue minus COGS. EBITDA margin also subtracts operating expenses. Rule of 40 uses EBITDA margin, not gross margin.

Why does this calculator output gross profit too?

Gross profit (revenue − COGS) is the dollar numerator behind the percent. Useful when boards discuss absolute contribution before margin ratios.