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Gross Margin

Revenue minus cost of goods sold, expressed as a percentage of revenue.

Gross Margin is the percentage of revenue remaining after subtracting the direct costs of delivering your product (COGS). For SaaS, this includes hosting, support, and third-party services. High gross margins (>70%) indicate a scalable business.

Formula

Gross Margin = (Revenue - COGS) / Revenue × 100

Tips

  • Target >70% gross margin for SaaS
  • Monitor infrastructure costs closely
  • High gross margin enables reinvestment

Related Terms

COGSEBITDAUNIT ECONOMICSREVENUEBURN RATE

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