Cost of Goods Sold

Also called COGS

Cost of goods sold: the direct costs of producing and delivering what you sell, hosting and payment fees for software, materials and shipping for physical goods. Excludes overhead like marketing and admin.

Why it matters

COGS is what you subtract from revenue to get gross margin, so getting the line right is essential to knowing your real economics. Founders often understate it by forgetting delivery and support costs.

For example

For a SaaS company, hosting and payment fees of 15 lakh on 1 crore of revenue are the cost of goods sold, leaving an 85 percent gross margin.

Related terms

Gross Margin Operating Expenses Contribution Margin

Go deeper

See how founders actually handle this on Money, pricing and metrics, part of the Starting Up hub.

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