[beambot]

MSRP of 3x COGS is a pretty common rule of thumb for hardware. Have to leave room for distribution, software, R&D, returns, SG&A, etc. End of the day, it's probably still only 30-40% gross margin -- less than half of a good SaaS company. Hardware is (indeed!) hard.

[scyzoryk_xyz]

Having worked in a tiny start-up-turned-company doing hardware for medical training, my biggest takeaway was that it is very slow but that it can also be very stable.

Like, yeah our margins were/are super high, and so were/are the distributors’, but once everything was spun up and running it was also very stable and predictable.

We were located on the outskirts of a 3rd tier Eastern European city and yet we were plugged right into the same global parts supply chain and capable of doing the same global distribution you could elsewhere. If you’re on to something, it’s a good time to be doing hardware. But you’re correct - 2/3 of the entire company was distribution/sales and R&D.

[cenamus]

But then how could you call that 100 profit in any way? If you made at most like 30-50?

[gamblor956]

You are conflating two different types of profit.

Gross profit = sales or service revenue less the expenses directly related to producing that revenue (this does not include backoffice functions, R&D, rent, etc.)

Net profit, which is the total revenue of the business less all expenses of the business (so, this includes R&D, rent, and the "backoffice" like HR, finance, legal, etc.)

Larger businesses with multiple business segment may account for gross profit separately for each business segment, but the business only ever calculates one net profit item.

There's also unit profit, which is essentially gross profit but at the level of a single unit of goods or services (for services, a unit is usually a customer contract, for recurring services it would be each period of the contract). Unit profit is generally the revenue from that specific unit less the costs directly associated with producing that revenue. Most companies don't calculate unit profit as generally it's not meaningful unless you sell high-value items, like automobiles or planes.

[usrusr]

Root post is taking about an upper bound, not about a precise guess. Context is what makes 100 a more fitting number than 40.