What Belongs in SaaS COGS and How to Compute Gross Margin
Written by Harry Prabandham
Curated by Rubric Financial
Last updated
1 / 5
Why COGS Definition Matters
- Cost of revenue captures the direct costs of delivering your product to paying customers each period.
- Where you draw the line between COGS and operating expense directly sets your reported gross margin.
- Investors benchmark SaaS on gross margin, so a loose or inconsistent definition erodes credibility in diligence.
- A clean COGS build also feeds unit economics like gross margin per customer and contribution margin.
Go deeper on this topic: From Flat Tiers to Token Taxes: A CFO's Guide to AI Software Economics→
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About the author
Harry PrabandhamFounder & CEO
Founder and CEO of StartupCFO. MBA from Wharton, MS in Computer Science, and decades of experience building and advising venture-backed startups.
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