Metrics
COGS (Cost of Revenue)
Quick definition
The direct costs of delivering your product: hosting, third-party fees, support, customer success, and for AI, model and inference costs.
Cost of goods sold, often called cost of revenue for software, is the set of direct costs required to deliver and support the product. For SaaS that typically includes hosting and infrastructure, third-party software and data fees, payment processing, and the customer-facing support and success functions; for AI-native products it also includes model, inference, and token costs. What you put in COGS versus operating expense directly sets your gross margin, so misclassifying support or infrastructure can mislead investors. Define your COGS policy and apply it consistently.
Related metrics terms
ARR (Annual Recurring Revenue)
Annualized value of your subscription revenue at a point in time.
MRR (Monthly Recurring Revenue)
Monthly equivalent of ARR, useful for month-over-month tracking.
Net Revenue Retention (NRR)
Revenue from your existing customer base 12 months later, including expansion and churn.
Gross Revenue Retention (GRR)
NRR without upsell: what you keep before expansion.
See this in action
Insights, guides, and tools where COGS (Cost of Revenue) shows up.
Frequently asked questions
- What is COGS (Cost of Revenue)?
- Cost of goods sold, often called cost of revenue for software, is the set of direct costs required to deliver and support the product. For SaaS that typically includes hosting and infrastructure, third-party software and data fees, payment processing, and the customer-facing support and success functions; for AI-native products it also includes model, inference, and token costs. What you put in COGS versus operating expense directly sets your gross margin, so misclassifying support or infrastructure can mislead investors. Define your COGS policy and apply it consistently.
- Why is COGS (Cost of Revenue) important for startups?
- COGS (Cost of Revenue) is a metrics concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does COGS (Cost of Revenue) belong to?
- COGS (Cost of Revenue) is a Metrics term in the StartupCFO finance glossary — alongside other metrics concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about COGS (Cost of Revenue)?
- Beyond this definition, see the related metrics terms below, or explore StartupCFO's insights and tools that put COGS (Cost of Revenue) in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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