Not All Gross Margin Is The Same - AVC

I like this additional color on gross margin. It is particularly relevant for software, and maybe even more for SaaS companies.

The trick, I think, is to wrap your head around the cost of revenue or cost of goods sold line item in the income statement and think about what is going on there. If it is very little to no effort, and largely just an accounting entry, then you may have a “low margin business” that is actually a high margin business. On the other hand, if it is a lot of work and capital investment to produce those margins, well then you have what you have and that is often a low margin business.

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