Gross Margin Benchmark by Industry
Enter your gross margin. See where you rank against the 11 industry segments we track — from SaaS (P50 ~75%) to construction (P50 ~20%).
Pure-play B2B or B2C software subscription businesses
How the Benchmark Works
Gross margin varies wildly across industries. A 45% gross margin is excellent in construction but weak in SaaS. The right benchmark is your peer segment, not a cross-industry average.
1. Pick your segment
Benchmarks vary wildly across segments. The right comparison is your peer group, not the industry at large.
2. Enter your number
Your actual metric from last quarter or year. Use a trailing-12-month average if your numbers are volatile.
3. See your percentile
Result maps to a percentile against your peer segment's P10, P25, P50, P75, and P90 benchmarks.
Frequently Asked Questions
What is a good gross margin by industry?
SaaS companies typically target 70-85% gross margin, professional services 40-60%, agencies 35-55%, manufacturing 25-45%, and construction 12-25%. Your peer segment matters more than cross-industry comparison — a 40% gross margin is excellent in manufacturing but weak for SaaS.
How is gross margin calculated?
Gross Margin = (Revenue - Cost of Goods Sold) / Revenue × 100. COGS includes direct costs of delivering your product or service: cloud hosting, payment processing, support labor for SaaS; materials and direct labor for physical goods; subcontractor costs for agencies.
What counts as COGS for SaaS businesses?
For SaaS: cloud hosting (AWS/Azure/GCP), payment processing fees, third-party APIs tied to product delivery, customer support salaries, and implementation/onboarding labor. Does NOT include: sales and marketing, R&D, general admin, or engineering costs for feature development.
Why do SaaS gross margins run so much higher than other industries?
Software has near-zero marginal cost to deliver one more copy once built. Physical goods have material and labor costs per unit; services have labor costs per hour delivered. SaaS's high gross margin is the foundation of its valuation multiples and the reason investors are willing to fund extended losses during the growth phase.
Where are these benchmark numbers sourced from?
Aggregated from public sources including the Bessemer Cloud Index (SaaS), NYU Stern Damodaran industry datasets, IBISWorld industry reports, and the SaaS Capital benchmark survey. Ranges are approximate trailing-12-month medians by industry for 2024-2025 data.
My gross margin is below P25 for my industry. What should I do?
Three common causes: (1) underpriced relative to market, (2) COGS creep from unnecessary services or inefficient delivery, (3) mis-categorization of OpEx into COGS. Start with cost audit — what exactly is in your COGS line? Then evaluate whether pricing needs adjustment. A 10% price increase almost always improves gross margin more than equivalent cost cuts.
How often should I benchmark my gross margin?
Quarterly for operational monitoring. Annually for strategic positioning. Margin drift over multiple quarters is a leading indicator of pricing erosion, cost creep, or product mix shift — all of which compound if not caught early.
Does this tool handle contribution margin?
No. Contribution margin subtracts variable costs only (not all COGS). Gross margin is a GAAP reporting measure; contribution margin is a managerial accounting construct. They can differ significantly. Use contribution margin for pricing and unit economics; use gross margin for peer benchmarking and financial reporting.
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