Unlike physical manufacturing, software has near-zero marginal cost — meaning it costs almost nothing to serve the 1,000,001st customer after the first million are built.
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How does this impact SaaS valuation?
High gross margins (80%+) are a result of digital economies of scale. As the company grows, more revenue drops to the "bottom line" because costs don't scale linearly with users.
Knowledge Challenge
Mastered Digital Economies of Scale? Now try to guess the related 6-letter word!
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