Gross Margin: $250K Revenue, $50K COGS
A consulting or software firm with $250K revenue and $50K COGS achieves an 80% gross margin.
How to use this tool
- Enter your total revenue for the period or product.
- Enter your cost of goods sold (direct costs only).
- Read your gross profit, gross margin percentage, and equivalent markup.
Service-based businesses and software companies with 80%+ gross margins have the most flexibility to invest in growth since the majority of each revenue dollar flows through to gross profit.
Frequently asked questions
- What is the difference between margin and markup?
- Margin is profit as a share of the selling price; markup is the same profit as a share of cost. Markup is always the larger number — a 40% margin is a 66.67% markup, and a 50% markup is only a 33.3% margin.
- What belongs in COGS?
- Only direct costs of producing or delivering the goods or service: materials, direct labour, and freight for products; hosting, support, and payment fees for software. Overhead, marketing, and R&D are operating expenses, not COGS.
- What is a good gross margin?
- It varies widely by industry. Retail and grocery run thin margins; software often exceeds 70–80%. Compare against peers in your sector and track the trend over time rather than chasing a universal number.