| Average Gross Margin |
| In order to compare the true cost from different vendors or approaches on the basis of the cost-per-sale, most companies need to back out the loaded cost of making the product. Usually, this is the difference between the price you charge for your product (the Average Sale) and the loaded cost of making the product, (not considering net profit, just for simplicity's sake,) divided by the price - which is what's available for sales and marketing. If you don't know what your Average Gross margin is, but you do know what your allocation for sales and marketing is, just use that. If you use VARs or distributors, start with the net dollars (on an average sale) that you receive after paying them their commissions. Either way: AGM = (Net - COGS) / Net |
