VetPulse / Glossary / Cost of Goods Sold (COGS)
What is Cost of Goods Sold (COGS)?
The direct cost of the drugs, supplies, diagnostics, and outside lab work consumed to deliver the services a practice bills for — the largest lever behind gross margin.
Worked example: A practice billing $1.2M a year with $270,000 in drugs, medical supplies, diagnostics, and outside lab fees has a COGS of 22.5% of revenue — leaving a 77.5% gross margin before rent, payroll, and other overhead are subtracted.
Typical COGS as a share of revenue, well-run independent general practice
| Pharmacy / drugs | 8–12% |
| Medical & surgical supplies | 3–5% |
| In-house diagnostics & outside lab | 4–6% |
| Total COGS | 18–24% |
Frequently asked questions
What counts as COGS at a veterinary practice?
The direct, variable costs tied to delivering a billed service — drugs dispensed, medical and surgical supplies consumed, and outside lab or diagnostic fees. It excludes fixed costs like rent and most payroll, which fall under overhead instead.
What's a healthy COGS percentage?
Most well-run independent general practices run total COGS around 18–24% of revenue. A number meaningfully above that range usually points to pricing that hasn’t kept pace with drug and supply costs, or to waste and shrinkage in inventory.
Does COGS include staff wages?
Generally no. Veterinary chart-of-accounts frameworks typically track payroll separately from COGS, since staff time isn’t a per-unit variable cost the way a vial of vaccine or a bag of IV fluids is.