SaaS Gross Margin: What It Is and What's Good

Q: What is a good gross margin for SaaS?

A good SaaS gross margin is 70% or higher. The median for public SaaS companies is around 72% according to the 2024 KeyBanc SaaS Survey. Top-performing companies exceed 80%. If you're below 60%, your unit economics likely need structural changes — either in pricing or cost of delivery.

Q: What's included in SaaS COGS?

SaaS cost of goods sold includes hosting and infrastructure costs, payment processing fees (like Stripe's 2.9% + €0.25), customer support salaries and tools, third-party API costs, and DevOps or site reliability expenses. It does not include R&D, sales, marketing, or general administration costs.

Q: What is the difference between gross margin and net margin in SaaS?

Gross margin measures how efficiently you deliver your product by subtracting only the cost of goods sold from revenue. Net margin subtracts all expenses — including R&D, marketing, sales, and overhead. A SaaS company can have 80% gross margin and still be unprofitable if operating expenses exceed the remaining 20%.

Q: Why is SaaS gross margin higher than other industries?

Software has near-zero marginal cost per additional user. Once the product is built, serving customer number 1,000 costs almost nothing compared to serving customer number 10. Physical product businesses have material, shipping, and manufacturing costs that scale linearly with volume. That structural advantage is why investors expect SaaS gross margins above 70%.

Q: How do Stripe fees affect gross margin?

Stripe charges approximately 2.9% + €0.25 per transaction in Europe. On a €49/month subscription, that's roughly €1.67 per payment — or 3.4% of revenue. For a business doing €30,000 MRR, Stripe fees alone consume about €870/month. These fees are a legitimate COGS line item and should always be included in your gross margin calculation. --- > **NoNoiseMetrics shows your MRR alongside your real Stripe fees — so you can track your effective margin without a spreadsheet.** [Free up to €10k MRR →](https://app.nonoisemetrics.com) **Next**: Put your gross margin into a financial model that predicts your runway → [SaaS Financial Model](/saas-financial-model-the-minimal-sheet-that-predicts-runway) --- Free Tool Try the MRR Dashboard Template → Interactive template — no signup required. --- *Sources: KeyBanc 2024 SaaS Survey, Bessemer Venture Partners Cloud Index 2024, Stripe Pricing Documentation 2025.*

Gross margin is the first number investors look at after ARR. Not your growth rate. Not your churn. Margin. Because it tells them whether your business model actually works — or whether you’re burning cash to deliver every euro of revenue.

Gross Margin (%) = (Revenue - COGS) / Revenue × 100

If your SaaS does €40,000 in monthly revenue and your cost of goods sold (COGS) is €8,000, your gross margin is 80%. That’s a healthy number. But most founders either overestimate it (by ignoring real costs) or never calculate it at all.

What Is SaaS Gross Margin?

Gross margin is the percentage of revenue remaining after subtracting the direct costs of delivering your product. In SaaS, those costs are mostly infrastructure, support, and payment processing — not the software development itself.

Gross profit margin in SaaS is different from traditional businesses. A physical product company might run at 40% gross margin and be fine. Software companies are expected to clear 70% or higher because the marginal cost of serving one more customer is close to zero. That expectation is baked into every SaaS valuation model.

The key distinction: gross margin measures delivery costs, not all costs. R&D, marketing, and your salary are below the gross margin line. They show up in operating expenses and affect net margin — a different conversation entirely.

What’s Included in SaaS Cost of Revenue

This is where most founders get the number wrong. SaaS COGS includes every cost directly tied to delivering the product to customers. Not building it. Delivering it.

Cost Category	Examples	Included in COGS?
Hosting & infrastructure	AWS, Vercel, Supabase, CDN	Yes
Payment processing	Stripe fees (2.9% + €0.25)	Yes
Customer support	Support salaries, Intercom, helpdesk tools	Yes
Third-party APIs	SendGrid, Twilio, mapping APIs	Yes
DevOps / SRE	Server monitoring, incident response staff	Yes
Software development	Your time building features	No
Sales & marketing	Ads, content, outreach	No
General admin	Legal, accounting, office	No

The biggest mistake? Ignoring Stripe fees. On a €49/month plan, Stripe takes roughly €1.67 per transaction. That’s 3.4% off the top. For a bootstrapped SaaS doing €20,000 MRR, that’s €680/month you need to count as COGS.

If you want to understand the difference between what you bill and what you keep, read the breakdown on gross vs net revenue.

SaaS Gross Margin Benchmarks

Not all SaaS companies are created equal. Your gross margin depends on how infrastructure-heavy your product is.

Company Stage	Gross Margin Range	Notes
Early-stage (<€500K ARR)	60–75%	Higher infra cost per customer, support not yet optimized
Growth (€500K–€5M ARR)	70–80%	Economies of scale kicking in
Scaled (€5M+ ARR)	75–85%	Best-in-class SaaS territory
Median public SaaS	72%	KeyBanc SaaS Survey, 2024
Top quartile public SaaS	80%+	Bessemer Cloud Index, 2024

Source: KeyBanc 2024 SaaS Survey, Bessemer Venture Partners Cloud Index 2024.

If you’re below 60%, something is structurally wrong — either your hosting costs are out of control, you’re over-staffing support, or your pricing is too low relative to infrastructure spend. The fix usually isn’t cutting costs. It’s raising prices or reducing your COGS.

Gross Margin vs Net Margin

Founders often confuse these two. They measure fundamentally different things.

Gross margin answers: How efficiently do I deliver my product?

Net margin answers: How much profit do I actually keep after everything?

Gross Margin = (Revenue - COGS) / Revenue × 100
Net Margin   = (Revenue - All Expenses) / Revenue × 100

A SaaS company can have 80% gross margin and -20% net margin if it’s spending heavily on growth. That’s normal for a venture-backed startup. For a bootstrapped founder, though, net margin matters more day-to-day because it determines whether you can pay yourself.

Metric	What it measures	Healthy range (SaaS)
Gross margin	Delivery efficiency	70–85%
Net margin	Overall profitability	10–25% (bootstrapped)
Net margin	Overall profitability	-30% to 0% (venture-funded, growth phase)

If your gross margin is strong but net margin is negative, the problem is in operating expenses — marketing, R&D, or overhead. If your gross margin itself is weak, no amount of growth will fix the business model.

How to Improve Your SaaS Gross Margin

Five practical moves, ranked by impact for a bootstrapped founder.

1. Audit your hosting costs. Most early-stage SaaS products are over-provisioned. Review your AWS or cloud bill line by line. Downsize unused instances. Switch to reserved pricing. A 30-minute audit can save 15–25% on infrastructure.

2. Optimize third-party API usage. If you’re paying per-call for APIs like SendGrid or Twilio, add caching, batching, or rate limiting. One founder I know cut their Twilio bill by 40% by deduplicating webhook retries.

3. Price for your costs. If your product is infrastructure-heavy (video processing, AI inference, large file storage), your pricing must reflect that. A flat €29/month plan for a product that costs €8/customer to run leaves you at 72% margin before support. Usage-based pricing components can protect your margin as customers scale.

4. Automate support. Every support ticket that gets deflected by good documentation, in-app tooltips, or a well-designed onboarding flow improves your gross margin. The goal isn’t zero support — it’s fewer avoidable tickets.

5. Renegotiate vendor contracts. Once you have volume, ask for discounts. Stripe offers custom pricing for businesses processing over €1M/year. Hosting providers give committed-use discounts. Even a 10% reduction in your two biggest COGS line items moves the needle.

Put your margin numbers into a financial model to see how a 5-point improvement in gross margin compounds over 12 months. The effect on runway is significant.

FAQ

What is a good gross margin for SaaS?

A good SaaS gross margin is 70% or higher. The median for public SaaS companies is around 72% according to the 2024 KeyBanc SaaS Survey. Top-performing companies exceed 80%. If you’re below 60%, your unit economics likely need structural changes — either in pricing or cost of delivery.

What’s included in SaaS COGS?

SaaS cost of goods sold includes hosting and infrastructure costs, payment processing fees (like Stripe’s 2.9% + €0.25), customer support salaries and tools, third-party API costs, and DevOps or site reliability expenses. It does not include R&D, sales, marketing, or general administration costs.

What is the difference between gross margin and net margin in SaaS?

Gross margin measures how efficiently you deliver your product by subtracting only the cost of goods sold from revenue. Net margin subtracts all expenses — including R&D, marketing, sales, and overhead. A SaaS company can have 80% gross margin and still be unprofitable if operating expenses exceed the remaining 20%.

Why is SaaS gross margin higher than other industries?

Software has near-zero marginal cost per additional user. Once the product is built, serving customer number 1,000 costs almost nothing compared to serving customer number 10. Physical product businesses have material, shipping, and manufacturing costs that scale linearly with volume. That structural advantage is why investors expect SaaS gross margins above 70%.

How do Stripe fees affect gross margin?

Stripe charges approximately 2.9% + €0.25 per transaction in Europe. On a €49/month subscription, that’s roughly €1.67 per payment — or 3.4% of revenue. For a business doing €30,000 MRR, Stripe fees alone consume about €870/month. These fees are a legitimate COGS line item and should always be included in your gross margin calculation.

NoNoiseMetrics shows your MRR alongside your real Stripe fees — so you can track your effective margin without a spreadsheet. Free up to €10k MRR →

Next: Put your gross margin into a financial model that predicts your runway → SaaS Financial Model

Free Tool
Try the MRR Dashboard Template →
Interactive template — no signup required.

Sources: KeyBanc 2024 SaaS Survey, Bessemer Venture Partners Cloud Index 2024, Stripe Pricing Documentation 2025.