Revenue and costs Updated November 2026

COGS as a percent of revenue

COGS as a percent of revenue = COGS / revenue. It is the usual way to forecast cost of goods sold: project revenue, then multiply by an assumed COGS percentage based on history. Gross margin is simply 1 minus this ratio.

Syntax

COGS % = COGS / Revenue;  Forecast COGS = Revenue x COGS %

Examples

COGS 600, revenue 1,000
=600 / 1000

Result: 60.0%

Forecast: revenue 1,100 at 60% COGS
=1100 * 60%

Result: COGS 660, gross profit 440

Gross margin from the ratio
=1 - 60%

Result: 40.0%

Common mistakes

Forecasting COGS as a fixed amount: most direct costs scale with volume, so model them as a percent of revenue (or per unit).
Hard-coding the percentage inside each year's formula; keep the assumption in one input cell and reference it with $.
Using a one-off year with unusual input prices as the base for the ratio; use a multi-year average or the latest normal year.

Practice COGS as a percent of revenue

These drills check your answer on live data, free, no account needed.

Cost as a share of revenueCost of goods sold runs at the percentage of revenue in B2. Fill row 6 with the cost for each year: write B6, then fill right to F6.
Gross profit and gross marginRevenue grows with B2 and cost of goods sold is given. Fill two rows: gross profit in row 7 (revenue less cost) and gross margin in row 8 (gross profit as a share of revenue).
One formula for a whole blockThree cost lines are each a fixed share of revenue (the shares are in column B). Write one formula in C7, fill it right to G7, then fill down to row 9 so the whole block C7:G9 is covered. It only works with mixed references.

Questions

Should COGS be a percentage of revenue or driven by units?

If you have volume and unit cost, build COGS = units x unit cost; it is more accurate. Percent of revenue is the standard shortcut when only financial statements are available.

What is a normal COGS percentage?

Whatever 1 minus the industry gross margin is: around 10% to 30% for software, 50% to 75% for retail and manufacturing.

Gross marginGross margin = (revenue - COGS) / revenue. The formula, worked examples with exact percentages, the difference between margin and markup and common mistakes.
Revenue growth and CAGRCAGR = (end value / start value)^(1 / years) - 1, or =RRI(years, start, end) in Excel. Year over year growth, exact examples and the off-by-one trap in n.
EBITDA marginEBITDA margin = EBITDA / revenue, the share of each sales dollar left as operating profit before D&A. Formula, exact examples, what is a good margin, errors.
Break-even pointBreak-even units = fixed costs / (price - variable cost per unit); break-even revenue = fixed costs / contribution margin ratio. Examples, margin of safety.