I'm surprised there are no comments here, I think this is a very interesting question.

We are b2b and need to have high isolation between customers which means dedicated resources. Because of this, it's likely out our margins are lower than many other SaaS categories.

We target 80-90% margin on most of our subscription plans.

> We are b2b and need to have high isolation between customers which means dedicated resources.

I'm curious - is that to avoid "noisy-neighbour" and provide performance guarantees through dedicated hardware, is it for security/privacy/etc or is it a combination of factors?

B2B would be for security purposes.

Noisy neighbor can still happen in the cloud ( happened to us in a French region)

B2B SaaS here, if you are asking about the gross margin (revenue minus cost of goods sold), I've always kept it above 90%. I'm careful not to use expensive hosting (like AWS) and I keep a close eye on COGS at all times.

COGS is key (and difficult). If you have an app that just serves up APIs, great. Just cost per request served.

When you start dealing with blended and combined costs (like large data warehouses) things can get hairy. But always aim for some estimate of COGS.

I run a serverless stack on AWS and my only cost is a minimal RDS instance that runs me about $15/month. I'm genuinely curious as to where this reputation for expensive hosting comes from.

If you do anything requiring 24x7 compute on EC2 (tons of CPU cores and memory), it adds up real quick. What does your app do?

70% gross margins is acceptable, 80% gross margins are normal, 90% are exceptional. Remember, in most cases you are losing 4% to payment processing right off the top.

We call it the 3, 7, and 10 rule.

3% on payment processing, subscription management and collection.

7% on AWS.

10% on product support, account management and retention.

If you’re fast growing this is about right. If you’re starting to slow down then you can afford to spend more time optimising these, eg 2, 4 and 9, giving you a GM of 85% which is elite for a B2B SaaS.

That’s great. I had never heard that framing before but I like it.

I like the % on AWS (or infra let’s say) because it is possible to be too cheap and get engineers to solve problems the clouds can offer you a solution off the shelf. Since the Engineers are making the decisions the may balk at spending $10k/m for something in a cloud but if it is framed as 0.1% ARR it can be put into perspective: this is 1/1000th of your infra spend, is it worth it? Or would you rather have X? The idea being to untie personal spending decisions and fear i to a business decision.

50$ on Digital Ocean and it brings in 2-3k$ per month. I'm selling API access to data (the servers process plenty of requests, I need to scale them up every once and then).

I've read about someone on linkedin with a 7$ VPS making 500k per year (half of that is selling data, the other half is talking to people via mail) but barely using the server, it's just to keep up a fancy dashboard.

Mind sharing URL?

Mine is $60 that bring in ±$600/mo

hey that sounds nice and cosy, what do you do if you don't mind me asking.

I run a diagram generator using OpenAI API, the pricing model is credit-based, kind of the same with most of the LLM-based SaaS out there :D

So you sometimes make $600/mo and, other times, you lose $600/mo?

hahaha, I supposed to use the ~ instad of ±

Onboarding and risk management tools for financial firms. Monthly spend is about $1500, which is about 10% of revenue. I can probably spend some time and bring that spend down to $1000 with some work (but currently time is better spent getting revenue up)

Edit: I would like to add that with a combination of fly.io and digital ocean the actual server costs are way under $100. Most of the costs are paying for other Saas needed for the product (document analysis, emails etc) and tools (github, copilot, sentry, etc)

Oh that sounds cool. Are you comfortable sharing a URL?

B2B SaaS. 4% of our gross revenue goes to Azure (dev & prod). 25% of our gross revenue goes to payroll.

I worked at a SaaS startup, where after 5 years, the monthly earnings would barely pay for the AWS bill and 1 mid level engineer. Gross profit was single digit percentage, based on the official COGS. COGS was likely low, since it expected to make the bad numbers look better. Most of the company got laid off. Even then, like 150% to 200% of revenue was going to payroll.

I'm interested to hear differences between services doing resource heavy work e.g. video processing vs a more typical SaaS like a CRM.

Should gross margin expectations be different?

Crypto accounting b2b tool here. We spend 90% of our time doing onboarding of accountants. 2 ppl company, before salary our operating costs are around 5%. We just have a simple Frontend deployed on heroku and then a bunch of nodejs workers pulling the data from various API. Our tech cost are probably less than 1%, the rest are tools and api cost. B2B is cheap if you don’t do stupid things like running kubernetes :)

Knowledge is key. If you're selling access to data people need, expect >80% easily. The key is actually having that data in the first place.