Understanding COGS & Gross Margin for SaaS Startups

One accounting concept I've seen cause an undue amount of confusion in SaaS (Software as a Service) startups is the Cost of Goods Sold (COGS). I believe it's crucial for founders to fully wrap their heads around COGS due to how it impacts Gross Profit (GP) and Gross Margin (GM) and, thereby, largely describes the scalability of a company's business model.