COGS (Cost of Goods Sold) for SaaS
COGS definition for SaaS and AI founders: what it means, how to calculate it, and common pitfalls when reading it in dashboards.
For a SaaS company, cost of goods sold is the cost of serving the customers you have: production hosting, AI and third-party APIs used by the product, payment fees, embedded services and customer support for existing customers.
Formula
Gross profit = Revenue − COGS
In practice
Staging environments, internal tools, R&D experiments and sales costs are not COGS. See what counts as COGS for SaaS.
Related terms
Related
- ARPAAverage MRR per paying customer.
- ARRAnnualized recurring revenue: MRR multiplied by twelve.
- CACSales and marketing spend per new customer.
- ChurnCustomers or recurring revenue lost in a period.
- Contribution marginRevenue minus all variable costs, including variable sales costs.
- Expansion MRRMRR added by existing customers through upgrades or more seats.
See your real margin in five minutes.
Connect Stripe and your cost providers with read-only access. Free for two connections — no card required.