GASP
Finance Efficiency Metrics Outcome Efficiency

Gross Margin

Cross-reference

This metric is defined in Core Metrics. Finance lists it here as a key outcome metric.

Gross Margin: Revenue minus cost of goods sold (COGS), as a percentage of revenue. Measures profitability after direct delivery costs.

Formula

Gross Margin = (Revenue (GAAP) - COGS) / Revenue (GAAP) × 100
GM-O = (Revenue − COGS − Support − CS − Implementation − Onboarding) / Revenue × 100
GM-M = (Revenue − COGS) / Revenue × 100
GM-M = GM-O + (Support + CS + Implementation + Onboarding costs) / Revenue × 100

Benchmarks

  • Below 60%: Low, may indicate infrastructure-heavy or services-heavy business
  • 60-70%: Moderate (Seed/Series A acceptable while scaling)
  • 70-80%: Good, typical for SaaS (Most VCs require 70%+ for investment)
  • 75-80%: Series B+ expected, attractive to investors
  • 80-85%: Best-in-class (commands valuation premium)

What It Tells You

How much of each dollar of revenue is available after delivery costs. Higher margins = more scalable business.

Dual-Lens: Operating / Market Forms

Both governed forms are computed from the same Commercial Event Ledger, with Attribution Taxonomy Layer tags deciding which events each form counts.

Operating Form: Contribution Margin (GM-O)

Contribution Margin is revenue minus every variable cost of serving customers. It shows what each customer earns after the costs that grow with the customer base.

CEL Source:
`Revenue_Event`, `Cost_Event`
ATL Inclusion:
`cost_function` ∈ (`infrastructure`, `support`, `success_engineering`, `implementation`, `onboarding`)
GM-O = (Revenue − COGS − Support − CS − Implementation − Onboarding) / Revenue × 100

What it tells you: How much profit each customer generates after every variable delivery cost, which is why it is the operating form.

Market Form: SaaS Gross Margin (GM-M)

SaaS Gross Margin is revenue minus COGS only (hosting, infrastructure and payment processing). It matches financial statement reporting and investor benchmarks.

CEL Source:
`Revenue_Event`, `Cost_Event`
ATL Inclusion:
`cost_function` = `infrastructure`
GM-M = (Revenue − COGS) / Revenue × 100

What it tells you: The market-comparable gross margin that investors expect at 70%+ for SaaS businesses.

Bridge

GM-M = GM-O + (Support + CS + Implementation + Onboarding costs) / Revenue × 100

The delta (GM-M − GM-O) is the **Services Drag:** the cost of running a customer operation that depends on people. A delta that declines over time points to more automation and self-serve adoption. SaaS Capital 2025 guidance on COGS allocation supports both approaches. VCs typically expect 70%+ SaaS gross margin (GM-M) while internal teams should track contribution margin (GM-O) for pricing and unit economics. ---

Connected in the GASP relationship graph.

Downstream: what this drives

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Sources

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