Cost of Goods Sold (COGS) refers to the cost to deliver the “good.” For SaaS companies, these are items that a single customer will need once they purchase the software. They tend to be infrastructure and customer support costs, such as:
Items like customer acquisition, software development, and G&A are not included in COGS since they don’t change with the addition of a new customer.
For SaaS companies, COGS are in the range of 5% to 40%. Higher COGS are generally influenced by more complex software implementation or service costs.
Your customer’s COGS include:
Your monthly COGS is $60,650 ($8,750 + $4,100 + $12,300 + $3,500 + $32,000). If your total monthly revenue is $200,000, then your percentage of COGS to revenue is 30% and your gross margin is 70%.