COGS

Cost of Goods Sold

In one sentenceThe direct costs of producing what you sold: materials, manufacturing, or for services, the people and tools that deliver the work.

What it means

COGS only includes costs that rise and fall with each sale. For a product company that means materials and production; for an agency or service, the delivery team's time and direct costs. Rent, marketing and admin are not COGS; they are OpEx vs CapEx.

How to use it

• Lower COGS (or raise prices) to improve Gross Margin.

Related terms

Gross Margin OpEx vs CapEx P&L Unit Economics