Definition
COGS are direct costs required to deliver the product/service. In SaaS, common COGS include hosting, third-party APIs, support, and payment processing depending on policy.
How to use it
- COGS drives gross margin, which powers LTV and payback.
- Segmented COGS can reveal unprofitable plans or cohorts.
Measured as
Measure COGS (Cost of Goods Sold) with the same date, unit basis, and accounting or policy definitions used in the rest of your model.
Operator takeaway
- COGS drives gross margin, which powers LTV and payback.
- Segmented COGS can reveal unprofitable plans or cohorts.
- Tie COGS (Cost of Goods Sold) to the same balance-sheet date, scenario, and decision memo you are using elsewhere in the model.
- Document which claims, costs, or adjustments your team includes before comparing numbers across forecasts, covenants, or valuation work.
Next decision
- Decide whether COGS (Cost of Goods Sold) belongs in cash planning, valuation, or debt monitoring so the number is used in the right model.
- If the number changes, trace the timing, policy, or balance-sheet assumption behind it before you react.