Gross margin
Gross margin definition for SaaS and AI founders: what it means, how to calculate it, and common pitfalls when reading it in dashboards.
Gross margin tells you how many cents of each revenue dollar you keep after paying to deliver the product.
Formula
Gross margin % = (Revenue − COGS) ÷ Revenue × 100
In practice
Never average daily margins — sum revenue and COGS over the period, then divide. Margin is undefined when revenue is zero or negative. Learn how to calculate it.
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.
- COGSThe direct cost of delivering your product to existing customers.
- Contribution marginRevenue minus all variable costs, including variable sales costs.
See your real margin in five minutes.
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