COGS (Cost of Goods Sold)
Also known as: Cost of Goods Sold, Cost of Sales
Cost of goods sold is the direct cost of delivering what you sold — materials, products, and the labor tied to the job itself.
What it actually means
COGS covers costs that exist only because a sale happened: the parts in the repair, the product you bought to resell, the technician hours on the job. It excludes costs you would carry regardless, like rent, office salaries, software, and advertising. Subtracting COGS from revenue gives gross profit, and the line between COGS and operating expense is where most small-business P&Ls go wrong. Classify direct labor as overhead and your gross margin looks healthy while the business quietly loses money on every job. Where that line sits is a bookkeeping decision with direct consequences for how you price.
A $900 detail package that consumed $180 in supplies and $220 in technician labor carries $400 of COGS and $500 of gross profit.
If you do not know your COGS per job, you do not know what a customer is worth — and you cannot tell whether a given cost per lead is a good deal or a slow loss.
Related terms
Gross margin is the share of revenue left after the direct cost of delivering it, expressed as a percentage.
A profit and loss statement shows revenue, costs, and expenses over a period of time, ending with the profit or loss that is left.
CAC is the total cost to acquire one new customer, including ad spend and all sales and marketing expenses, divided by customers won.
LTV is the total revenue (or profit) a customer generates over the entire span of their relationship with your business.
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