SaaS margin calculator

Calculate gross margin and contribution margin for SaaS pricing. Industry benchmarks for B2B SaaS, infrastructure costs, and LTV/CAC math.

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SaaS margin calculator benchmarks

Best-in-class gross margin
80%+
Median B2B SaaS gross margin
70-78%
Infrastructure cost typical
5-15%
Net retention target
110%+

SaaS has the highest gross margins of any major business model because the marginal cost of one more customer is close to zero — just the servers, support, and payment processing for that account. Best-in-class SaaS hits 80%+ gross margin. Below 70% is a structural red flag; investors discount the multiple.

What counts as COGS in SaaS?

For SaaS gross margin, COGS includes:

  • Hosting and infrastructure (AWS, GCP, Azure) — typically 3-10% of revenue
  • Third-party APIs and data costs (Twilio, OpenAI, Stripe processing) — 1-10%
  • Customer support staff directly attributed to current customers — 5-10%
  • Onboarding and customer success directly tied to a sale — 3-8%

It does not include sales, marketing, R&D, or G&A — those are operating expenses, not COGS. This is why SaaS gross margins look high (75-85%) but net margins for growing companies are often negative.

Benchmark gross margins

SaaS typeGross marginNotes
Pure software (B2B SaaS)80-85%Salesforce, Atlassian range
Software + light services70-78%most mid-market SaaS
Software + heavy services55-65%enterprise implementations
Vertical / specialized SaaS70-80%healthcare, finance, legal
AI-heavy / inference-heavy50-70%token costs eat margin
Infrastructure / PaaS60-75%data center pass-through
Why investors care so much about gross margin
Gross margin determines the ceiling on a SaaS company's profitability. Operating expenses (sales, marketing, R&D) compound; if gross margin is 50%, every dollar of revenue only contributes 50¢ toward those expenses. At 80%, it contributes 80¢. The difference compounds into 2-3x valuation multiples at IPO scale.

Frequently asked

Why are SaaS gross margins so high?

Because once the software is built, serving one more customer costs almost nothing — just the marginal server, storage, and support cost. The big costs (R&D, sales) are operating expenses, not COGS.

Is 60% gross margin bad for SaaS?

It's a yellow flag, not a red flag. Some SaaS sub-types (AI-heavy, services-heavy, infrastructure pass-through) structurally run lower. But if you're a pure-play B2B SaaS at 60% gross, you have a cost problem to fix before scaling.

Should I include CAC in margin calculations?

Not in gross margin. CAC belongs in LTV/CAC ratio and contribution margin per cohort. Mixing CAC into gross margin makes you uncomparable to other SaaS companies and confuses pricing decisions.

Compare across industries

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