Physical products where venture-scale viability usually depends on a recurring (SaaS-like) layer on top of device sales. Margins (40–60%) carry components, freight, and warranty; attach rate, RMA/warranty rate, and inventory turns are the operational gates. Track one-off vs recurring revenue separately — recurring earns a far higher multiple.
Representative companies
- Peloton — hardware plus subscription
- Sonos — premium connected audio
- Whoop — device bundled into a membership
Primary metrics
The metrics that define health for a hardware business.
- Gross marginGlobal / FinancialSaaS 70-85%; Mkt 80-90% (net rev); Ecom/DTC 30-50%; Sub 30-50%; Media 35-50%; Usage 50-80% (Twilio ~50%, Snowflake ~75% product); Fin software 80%+ (lending: use NIM); HW 40-60% (Apple ~37%, Cisco ~65%).
- Contribution margin (CM1/2/3)Global / FinancialDTC CM3 (post-CAC) >20% common target. Tier definitions are NOT standardized - verify the stack before comparing.
- Return / RMA / warranty claims rateRetentionConsumer-electronics returns ~3-15%; warranty claims US avg ~1.43-1.52%; manufacturing defects <1%. Separate remorse returns from quality RMA.
- Inventory turnoverRetentionEcom ideal ~4-6x; leaders 8+; consumer-electronics retail ~6-10x.
- Attach rateRevenueHighly product-dependent; only anecdotes (e.g. AT&T U-verse broadband >90%).
- Repeat / accessory (recurring) revenue splitRevenueNo 'good' %; recurring revenue earns 2-3x EV/revenue multiple vs one-off.
Secondary metrics
Omega Point BenchmarksHardware