SaaS Gross Margin Calculator

Method and assumptions

Gross margin should include costs directly required to deliver the product, such as hosting, support and payment processing. Keep sales and general overhead separate.

Worked scenario

Take one closed month and map hosting, third-party APIs, payment processing, customer support and service-delivery payroll into cost of revenue. Keep product development, sales and general administration outside the gross-margin layer. Repeat the calculation by product or customer segment where delivery profiles differ.

How to interpret the result

Gross margin shows how efficiently recurring revenue converts into gross profit before operating expenses. A rising company average can conceal an expensive customer segment, and a temporary cloud credit can overstate economics. Compare reported margin with unit-level cloud and support cost and normalize non-recurring credits.

Input reference

Currency

Example default: USD

Monthly recurring revenue

Example default: 100000

Hosting and infrastructure

Example default: 12000

Support and delivery cost

Example default: 8000

Payment processing cost

Example default: 3000

Paying customers

Example default: 800

Target gross margin

Example default: 80%

Common mistakes

• Excluding support or delivery payroll from cost of revenue.
• Including all engineering expense without an allocation policy.
• Using promotional cloud credits as a permanent cost level.

Before using the result

1. Publish a written cost-of-revenue classification policy.
2. Segment margin where product usage profiles differ.
3. Reconcile the calculator with the monthly income statement.

Questions to check before deciding