Gross Margin
Gross margin % = (Revenue − COGS) / Revenue. Profit before operating expenses.
Result
Gross margin
70.00%
Healthy software / services
- Revenue$1,000,000
- COGS$300,000
- Gross profit$700,000
- Gross margin70.000%
- TierHealthy software / services
Step-by-step
- Gross profit = revenue − COGS = 1000000 − 300000 = $700,000.
- Gross margin = 700,000 / 1000000 = 70.00%.
How to use this calculator
- Enter revenue + COGS.
About this calculator
Gross margin (GM) = (revenue − cost of goods sold) / revenue. Excludes operating expenses (sales, marketing, R&D). Industry benchmarks: SaaS 70-90%, software 60-80%, manufacturing 30-50%, retail 20-40%, grocery 1-5%. High GM = scalable + flexibility for OpEx investment. Low GM = volume game (Walmart sells huge quantities at razor-thin margins to make absolute dollar profits).
Frequently asked
Direct costs: raw materials, manufacturing labor, payment processor fees, hosting (for SaaS). Doesn't include sales, marketing, R&D.
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