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Profit Margin Calculator

Gross and net profit margin percentage.

Result

Gross margin

40%

Profit
$400.00
How it’s worked out
  1. Profit = revenue − cost = $1,000.00 − $600.00 = $400.00
  2. Margin = profit ÷ revenue × 100 = 40%

Profit Margin Calculator

What this calculator does

This calculator computes gross profit margin, net profit margin, and markup percentage from your revenue and cost figures. It helps business owners, freelancers, and sellers understand how much of each dollar of revenue translates into actual profit.

Profit margin is arguably the single most important metric for business health. A company can have impressive revenue but still lose money if margins are too thin. This calculator makes it easy to evaluate pricing decisions, compare products or services, and benchmark against industry averages.

Whether you sell physical products, offer services, or run an e-commerce store, knowing your margins helps you price correctly, negotiate with suppliers, and identify where costs need to be cut.

How to use it

  1. Enter your revenue (total sales, e.g. $50,000).
  2. Enter your cost of goods sold (COGS) for gross margin (e.g. $30,000).
  3. Optionally enter total expenses (COGS + operating expenses) for net margin.
  4. Review gross margin, net margin, and markup percentage in the results.

Formulas used

  • Gross profit = Revenue − COGS

  • Gross margin = (Gross profit / Revenue) × 100 Example: ($50,000 − $30,000) / $50,000 × 100 = 40%

  • Net profit = Revenue − Total expenses (COGS + operating costs + taxes + interest)

  • Net margin = (Net profit / Revenue) × 100 Example: ($50,000 − $42,000) / $50,000 × 100 = 16%

  • Markup = (Gross profit / COGS) × 100 Example: $20,000 / $30,000 × 100 = 66.7% markup Note: A 40% margin equals a 66.7% markup. Margin and markup are related but different.

Examples

Example 1 — E-commerce product: Revenue = $25 per unit. COGS = $10 (product + shipping). Gross margin = ($25 − $10) / $25 = 60%. Markup = $15 / $10 = 150%.

Example 2 — Service business: Monthly revenue = $12,000. Direct costs = $3,000 (subcontractors, tools). Operating expenses = $5,000 (rent, marketing, admin). Gross margin = $9,000 / $12,000 = 75%. Net margin = $4,000 / $12,000 = 33.3%.

Example 3 — Restaurant: Revenue = $80,000/month. Food costs = $28,000. Total expenses = $72,000. Gross margin = $52,000 / $80,000 = 65%. Net margin = $8,000 / $80,000 = 10%. Restaurant margins are notoriously thin—10% net is considered healthy.

Tips and common mistakes

  • Don't confuse margin with markup. A product that costs $60 and sells for $100 has a 40% margin but a 66.7% markup. Mixing these up leads to pricing errors.
  • Gross margin shows product profitability; net margin shows business profitability. You can have great gross margins but poor net margins if operating costs are too high.
  • Benchmark against your industry. Software companies average 70–85% gross margins. Retail averages 25–50%. Restaurants average 60–70% gross but only 3–10% net. Know what is normal for your sector.
  • Track margins over time. A declining margin trend signals rising costs, pricing pressure, or inefficiency—catch it early.
  • Include all costs. Sellers on Amazon or Etsy often forget to include platform fees, payment processing, returns, and advertising in their cost calculations, leading to inflated margin estimates.
  • Higher margin is not always better. Extremely high margins may signal overpricing that suppresses volume. The goal is the margin-volume combination that maximizes total profit.

Common questions

What is the difference between gross and net profit margin?

Gross margin = (Revenue − Cost of Goods Sold) ÷ Revenue. Net margin subtracts all expenses including overhead, taxes, and interest. Net margin is always lower.

What is a good profit margin?

It varies by industry. 10% net margin is considered average for many businesses, 20%+ is strong. Software companies often exceed 30%, while grocery stores may operate at 1–3%.