Gross Margin Tells the Business Model Truth
Explain why gross margin is a business-model signal for startup finance decisions.
Revenue answers what customers paid. Gross margin answers what the company kept after delivering it. The formula Gross margin is revenue less cost of goods sold, divided by revenue. In startup terms, COGS can include hosting, payment fees, support labor tied directly to delivery, implementation contractors, data costs, or hardware fulfillment. The exact definition should be consistent and defensible. Why it works Gross margin reveals operating leverage. If delivering the next $1 of revenue costs $0.20, the company has $0.80 to fund growth and overhead. If it costs $0.75, growth may not improve runway much. This is why finance teams…
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