On this page, you'll find insights, benchmarks, and expert resources to help you assess and improve your gross profit margin.
Optimizing pricing isn’t just about growing top-line ARR; it’s also about expanding gross profit on each sale, which makes the business more profitable and attractive to buyers.
We asked the topmost active buyers what matters most when evaluating SaaS companies, and gross margin was a top theme. This exclusive report unpacks how buyers assess GPM, where benchmarks are rising, and what it means for valuation.
The 1Q25 SaaS M&A and Public Market Report shows that companies with stronger gross margins are outperforming peers in both public comps and M&A outcomes.
Inside, you’ll find benchmarks by growth cohort, Rule of 40 performance breakdowns, and insights into how efficient growth is driving higher multiples.
Gross margin is among the 20 core factors buyers weigh heavily when evaluating software companies. This white paper outlines the complete framework SEG uses to assess strengths, risks, and opportunities, helping operators prepare for capital raises or strategic exits.
The SEG SaaS Index tracks over 120 public software companies, and gross margin is one of the most telling indicators of value.
Use this interactive tool to benchmark your company against public peers in your sector and to understand what buyers are seeing when they size up your financials.
Many SaaS operators unintentionally inflate their gross margin by excluding key costs like support, hosting, and DevOps from COGS. In this blog, we break down what really belongs in COGS, how to calculate it accurately, and why getting it right could mean millions more at exit. Over 10,000 people read this blog every month to understand how to calculate COGS correctly.
Your P&L is the foundation of every key metric you rely on. If it’s not set up correctly, your ability to make sound business decisions is compromised. Worse, messy or miscategorized data can create operational drag, delaying financial reviews and forcing your team to spend time untangling numbers instead of driving growth. This blog breaks down how to structure your P&L for clarity, confidence, and speed.
Many SaaS founders underestimate how closely buyers and investors scrutinize gross margin. This blog explains why companies with 80%+ GPM consistently earn higher valuation multiples—and why margins below 70% raise red flags. Backed by SEG’s transaction data and SaaS Index benchmarks, it’s a must-read for anyone who wants to understand how gross margin truly impacts enterprise value.
Most SaaS companies inflate their Lifetime Value (LTV) by calculating it off top-line revenue and not gross profit. But if your margins are thin, that LTV/CAC ration may not be as healthy as it seems. This blog shows how gross margin directly impacts customer unit economics and why getting it right is critical for making smart growth decisions.
Here’s how gross margins broke down across SEG’s last 50 closed SaaS transactions.
While most companies had margins above 65%, those in the 85%+ range stood out receiving 22% more offers and achieving 27% higher ARR multiples on average. It’s clear that higher gross margins drive stronger demand and better outcomes in the M&A process.
