Gross Margin

Gross margin is the percentage of revenue left after subtracting the direct cost of producing or delivering what was sold.

Gross margin is the number that determines break-even ROAS — a business can't spend more on acquiring a customer than its gross margin allows without losing money on that customer's first purchase. It's also the first input most performance marketers should ask for before setting any ROAS or CAC target, and one many marketers never actually ask for.

What counts as COGS (and therefore what's subtracted to get gross margin) varies by business model — a SaaS company's COGS might just be hosting and customer support costs, while a D2C brand's COGS includes manufacturing, packaging, and shipping.