Topic: High Technology

Subject: Gross Margins for SaaS Companies
William Lieberman
Member: 2015
Submitted on 09-12-16 5:48 pm

I have heard two conflicting opinions when it comes to calculating gross margins for a SaaS business: 1) include compensation expenses associated with the development of the product, i.e. programmers, 2) include only those expenses directly associated with selling and hosting

I am not sure why expenses associated with the actual development of the product would be included in COGS (and therefore, subtracted to get to gross margin). Is there a reason why they should be in COGS?

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