All termsFINANCE & PRICING

COGS

Cost of Goods Sold

Also known as: Cost of Revenue

DEFINITION

The direct costs of delivering your SaaS service to a customer — hosting, third-party APIs, payment fees, customer support.

In depth

COGS in SaaS includes everything that scales with customers: cloud hosting, third-party API costs (Stripe, Twilio, OpenAI), CDN, support salaries, customer success tooling.

It does NOT include engineering salaries (that's R&D), marketing (S&M), or office rent (G&A). Getting this classification wrong inflates gross margin on paper while leaving the business broke in cash.

Related terms

Gross Margin

The percentage of revenue left after deducting the direct cost of delivering the service (hosting, support, payment fees).

Unit Economics

The revenue and cost of a single customer or transaction, used to prove the business model works before scaling.

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Last reviewed 14 April 2026 by Abhi Verma.