Mon–Fri: 10:00 – 18:00 
Request a call 
Gross Margin Calculator
Gross profit, gross margin %, markup, and COGS ratio in one panel. Compare against industry benchmarks for SaaS, e-commerce, or services to see whether your pricing leaves enough room for growth.
Gross margin vs markup — the difference that costs companies money
Gross margin and markup measure the same gap (revenue minus COGS) but from different sides. Confusing them is one of the most common pricing mistakes, especially in e-commerce where suppliers quote markup and you report margin.
The formulas
gross profit = revenue − COGS gross margin = gross profit / revenue × 100% markup = gross profit / COGS × 100%
Why margin ≠ markup
50% markup is NOT 50% margin. If you buy at $100 and sell at $150, that is 50% markup ($50 / $100) but 33% margin ($50 / $150). To convert: margin = markup / (1 + markup). A 100% markup = 50% margin, not 100% margin.
Industry benchmarks (2026)
- Pure SaaS: 80-90% gross margin. Hosting + payment processing + support is most of COGS.
- SaaS with services component: 60-75% — implementation labor pulls it down.
- Digital services / agencies: 50-70% — labor IS the COGS.
- E-commerce (private label): 40-60% blended.
- E-commerce (resale / distribution): 20-35%.
- Manufacturing (B2B): 25-40%.
What gross margin tells you about a business
- High margin (60%+): you can afford to over-invest in sales and marketing — CAC can be high if LTV scales with margin.
- Mid margin (30-60%): balanced — CAC must stay below 25% of LTV.
- Low margin (under 30%): volume-driven business. Marketing budget is tiny relative to revenue. Operational efficiency wins.
How to calculate gross margin
Two numbers from your P&L. Make sure COGS includes everything that scales with revenue.
Define revenue
Net revenue (after returns / refunds), not gross sales. Use the same definition your finance team reports.
Sum up COGS
Direct costs of delivering the product: hosting, payment fees, support salaries (for SaaS), product cost + shipping (for e-com), labor (for services). Exclude rent, marketing, R&D — those are operating expenses, not COGS.
Calculate the margin
The calculator does this in milliseconds. Read the percentage.
Compare against benchmark
Below industry benchmark? Pricing too low, COGS too high, or both. Above benchmark? You have pricing power — consider reinvesting in growth.
Track over time
Gross margin should improve as you scale (better hosting deals, automation, etc). If it declines, audit before it compounds.
Frequently asked questions about gross margin
75-85% for pure SaaS is healthy. 85-90% is excellent and typical for self-serve products with minimal support. Below 70% suggests heavy professional-services or labor-intensive support is dragging it down — common for early-stage SaaS that has not yet built scalable onboarding.
They measure the same dollar gap from different sides. Gross margin = profit / revenue. Markup = profit / cost. A 100% markup (selling for double cost) is only a 50% gross margin. Confusing them is the most common pricing mistake — always specify which you mean.
For SaaS, yes — customer support that scales with customer count is COGS. Engineering R&D and sales salaries are operating expenses, not COGS. The litmus test: does this cost increase if revenue doubles? Yes = COGS. No = OpEx.
Gross margin = revenue minus all COGS (variable + fixed direct costs). Contribution margin = revenue minus only variable costs per unit. For unit-economics analysis (CAC payback), contribution margin is often more useful than gross margin.
Usually one of three reasons: heavy enterprise deals require services (drags margin), infrastructure costs not yet optimized at scale, or new product lines with lower margins blending the average down. Audit COGS by product line to find the cause.
Higher margin = more marketing budget can be efficient. Rule of thumb for SaaS: marketing as % of revenue can be up to (1 − gross margin) ÷ 2 in early stages without breaking unit economics. So at 80% margin, marketing up to 10% of revenue is comfortable.
