Gross Margin
Revenue minus the direct cost of delivering it, as a percentage of revenue.
Gross margin is what remains after the costs directly tied to delivering the product — hosting, payment processing, support, third-party APIs. It excludes sales, marketing and general overhead.
SaaS businesses are typically expected at 70–85%. Marketplaces and hardware-inclusive businesses run lower, and are valued differently as a result.
Margin determines what the business can afford. Every unit-economics calculation that matters — LTV, payback, contribution — is built on gross profit rather than revenue.