SaaS pricing should target 70%+ gross margin. If COGS is $5/user, minimum price is
Value-based pricing beats cost-plus. Charge what customers save or earn, not what it costs you.
Reach for this calculator when you need to present a business metric to stakeholders. Accurate, consistently-defined figures command more credibility than estimates, particularly in financial discussions.
A common mistake is comparing metrics that use different definitions — gross margin versus net margin, revenue versus profit, customer count versus paying customer count. Always confirm the definition of each input before comparing results across periods or sources.
A product manager calculates gross margin for a new product line: manufacturing cost £8.50, proposed retail price £24.99. The calculator returns a 66% gross margin — above the company's 60% threshold, confirming the pricing is viable before taking it to the finance team.
70–80% gross margin is standard for SaaS. Below 60% is a red flag for investors.