SaaS COGS Calculator: Calculate True Cost of Goods Sold for Software Products

Understanding your SaaS Cost of Goods Sold (COGS) is fundamentally different from calculating COGS for physical products, yet many software founders struggle to identify their true per-customer costs. Unlike physical products where COGS is straightforward (materials, manufacturing, shipping), SaaS COGS includes ongoing costs that scale with your customer base like hosting infrastructure, customer support, payment processing fees, and third-party API costs. This calculator helps SaaS businesses, subscription services, WordPress plugin developers, and digital product sellers accurately calculate their gross margins, determine sustainable pricing, and understand unit economics.

Whether you’re running a WordPress plugin business with recurring subscriptions, a cloud-based application, or a membership site, knowing your true COGS per customer is critical for making informed decisions about pricing, growth investments, and profitability targets. This calculator accounts for all the unique costs that SaaS businesses face, from server costs that increase with usage to support team expenses that grow with customer count, giving you accurate metrics like Monthly Recurring Revenue (MRR), Customer Lifetime Value (LTV), and gross profit margins that investors and stakeholders care about.

Why SaaS COGS Is Different from Physical Product COGS

The fundamental difference lies in the cost structure and scalability model. Physical products have high per-unit variable costs (each item sold requires purchasing or manufacturing that specific unit), while SaaS products have high upfront development costs but much lower incremental costs per new customer. Here’s what makes SaaS COGS unique:

• Development Costs Are Amortized: Unlike physical products where manufacturing cost is incurred per unit, SaaS development is a one-time investment amortized across all customers over time.
• Infrastructure Scales with Usage: Hosting, database, CDN, and server costs increase based on customer usage patterns, not just customer count.
• Support Costs Are Per-Customer: Each customer requires ongoing support, onboarding, and success management, making support a significant COGS component.
• Subscription Model Metrics: SaaS businesses track MRR, ARR, churn rate, and LTV instead of one-time sales revenue.
• Third-Party Dependencies: Payment processors (Stripe, PayPal), API services, email platforms, and other tools create variable costs that physical product businesses don’t face.
• Gross Margin Expectations: SaaS businesses typically target 70 to 90 percent gross margins, while physical products often see 30 to 60 percent margins.

This calculator is specifically designed for the SaaS business model, accounting for recurring costs, subscription metrics, and the unique economics of software-as-a-service. If you sell physical products in WooCommerce, use our standard COGS calculator instead.