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Gross Margin Calculator

Subtract COGS from revenue, divide by revenue. See the percent left to fund everything else.

Inputs
$
$
Formula · (Revenue − COGS) / revenue × 100

Result

Fill the inputs to see your result.

What is gross margin?

Gross margin is the percent of revenue left after the direct cost of delivering the product. It is the foundation under every other margin and ratio.

The gross margin formula.

Gross margin = (revenue − COGS) / revenue × 100. Gross profit is the dollar version: revenue minus COGS.

A worked example.

Revenue of 1,000,000 and COGS of 250,000 gives gross profit of 750,000 and a gross margin of 75%.

What belongs in SaaS COGS.

Hosting, third-party software embedded in the product, payment processing, and customer support. Sales, marketing, and R&D are not COGS.

What is a good SaaS gross margin?

Healthy SaaS sits at 70% to 85%. Below 70% the business looks more like a services or infrastructure company and rarely earns SaaS multiples.

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FAQ

How do you calculate gross margin?
Subtract cost of goods sold from revenue, divide by revenue, then multiply by 100. 1,000,000 revenue and 250,000 COGS is 75% gross margin.
What is a good gross margin for SaaS?
SaaS gross margins typically sit at 70% to 85%. Below 70% suggests heavy COGS (hosting, support, services revenue) that limits operating leverage.
What is the difference between gross margin and gross profit?
Gross profit is the dollar amount left after COGS. Gross margin is gross profit as a percent of revenue.
What belongs in COGS for SaaS?
Hosting, third-party software baked into the product, payment processing, and customer support. Not S&M or R&D.
Why does gross margin matter?
It sets the ceiling for every other margin. LTV, payback, and EBITDA all sit on top of gross margin.

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