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Revenue

Gross Margin Calculator

Gross Margin shows how much of every revenue dollar remains after covering the direct cost of goods sold, before any other operating expense is considered.

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Gross Margin

70.0%

What This Means

SaaS companies typically run above 70%; physical product businesses often sit closer to 40-60% once manufacturing and shipping are factored in.

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The Formula

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

Why It Matters

Gross margin isolates the core economics of a business before discretionary spending on marketing, salaries, or rent gets layered on top. It's also the input almost every other unit-economics number in this list depends on, from Breakeven CAC to Break-Even ROAS, so an inaccurate margin figure quietly throws off every calculation downstream of it.

Example

A company earns $500,000 in revenue with $150,000 in cost of goods sold. Gross margin is ($500,000 minus $150,000) divided by $500,000, times 100, which equals 70%.

Frequently Asked Questions

  • Direct costs tied to producing or delivering what was sold, such as materials, manufacturing, shipping, or hosting infrastructure for software. It excludes indirect costs like marketing or sales salaries.

  • It depends heavily on business type. SaaS companies commonly run above 70%, while physical product and retail businesses often land in the 40 to 60% range.

Related Calculators

Break-Even ROAS CalculatorBreakeven CAC Calculator

From the Glossary

Gross MarginContribution MarginNet Profit Margin
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