Profit Margin Calculator

Calculate gross margin, net margin, and markup percentage for any product or business in seconds.

Profit Margin Calculator

Calculate gross and net profit margins

Profit Margin Calculator

Enter cost and revenue

Formula
Margin = (Revenue - Cost) / Revenue x 100

What Is Profit Margin?

Profit margin measures how much of your revenue you actually keep after covering costs. Gross margin tells you what's left after subtracting the direct cost of goods sold (COGS) — it reflects the efficiency of your core operations. Net margin goes further, accounting for all operating expenses including salaries, rent, marketing, and taxes. Together, these two numbers paint a complete picture of your business's financial health.

Margin analysis is essential for pricing decisions, investor presentations, and benchmarking against competitors. A product with a 10% gross margin and a 2% net margin signals that overhead is eating most of the profit — a warning sign. Conversely, a high gross margin with a healthy net margin means the business model is sound and scalable. Whether you're running a retail shop, a restaurant, or a SaaS company, knowing your margins is non-negotiable.

How to Use This Calculator

  1. 1Enter your total revenue (the selling price or total sales for the period).
  2. 2Enter your cost of goods sold (COGS) — the direct costs tied to producing or purchasing what you sell.
  3. 3Optionally enter operating expenses (salaries, rent, utilities, marketing) to calculate your net margin.
  4. 4Click Calculate to instantly see gross profit, gross margin %, net profit, net margin %, and markup %.

Profit Margin Formulas

Gross Profit = Revenue − COGS Gross Margin % = (Gross Profit / Revenue) × 100 Net Profit = Revenue − COGS − Operating Expenses Net Margin % = (Net Profit / Revenue) × 100 Markup % = (Gross Profit / COGS) × 100

Margin and markup are often confused but they're calculated from different bases. Margin is expressed as a percentage of revenue — it tells you how much of each dollar of sales you keep. Markup is expressed as a percentage of cost — it tells you how much you added on top of what you paid. A 50% markup equals a 33.3% margin. Always clarify which metric you're using when discussing profitability with partners or investors.

Worked Examples

Retail Store

A clothing retailer earns $50,000 in monthly revenue and pays $30,000 for inventory (COGS). Gross Profit = $50,000 − $30,000 = $20,000. Gross Margin = ($20,000 / $50,000) × 100 = 40.00%. Markup = ($20,000 / $30,000) × 100 = 66.67%. This means the store marks up its products by two-thirds and retains 40 cents of every sales dollar before operating costs.

Restaurant

A restaurant brings in $80,000 per month. Food and beverage costs (COGS) run $24,000, while operating expenses (staff, rent, utilities) total $40,000. Gross Margin = (($80,000 − $24,000) / $80,000) × 100 = 70.00%. Net Profit = $80,000 − $24,000 − $40,000 = $16,000. Net Margin = ($16,000 / $80,000) × 100 = 20.00%. A 70% gross margin is strong for food service, and a 20% net margin is well above the industry average of 3–9%.

Software Company (SaaS)

A SaaS startup generates $200,000 in monthly recurring revenue. COGS (hosting, support) = $20,000. Operating expenses (engineering, sales, marketing) = $120,000. Gross Margin = (($200,000 − $20,000) / $200,000) × 100 = 90.00%. Net Profit = $200,000 − $20,000 − $120,000 = $60,000. Net Margin = ($60,000 / $200,000) × 100 = 30.00%. The near-90% gross margin is typical for software — the real cost is people, not product delivery.

Frequently Asked Questions

What is a good profit margin by industry?▾
It depends heavily on the sector. Software and pharmaceuticals often see gross margins above 70–80%. Retail typically runs 20–50%. Restaurants average 3–9% net margin. Construction and manufacturing commonly land between 5–20%. The best benchmark is your own industry's average — a 10% net margin might be excellent in food service but underwhelming in tech.
What is the difference between gross margin, net margin, and operating margin?▾
Gross margin = (Revenue − COGS) / Revenue. It measures production efficiency. Operating margin subtracts operating expenses (salaries, rent, R&D) from gross profit before interest and taxes. Net margin is the bottom line — it accounts for everything including interest payments and taxes. Each layer reveals a different level of cost control in the business.
How can I improve my profit margins?▾
There are two levers: raise revenue or cut costs. On the revenue side, consider raising prices (even small increases have outsized impact on margin), upselling higher-margin products, or improving conversion rates. On the cost side, renegotiate supplier contracts, reduce waste, automate repetitive tasks, or consolidate vendors. Often, the fastest wins come from identifying your highest-margin products and shifting your sales mix toward them.
Why do people confuse margin and markup?▾
Both express profitability as a percentage, but they use different denominators. Margin divides profit by revenue; markup divides profit by cost. A product that costs $60 and sells for $100 has a $40 gross profit — that's a 40% margin (40/100) but a 66.7% markup (40/60). Mixing the two up leads to serious pricing errors. When in doubt, always state which base you're using.
Why do companies like Amazon have thin margins but high valuations?▾
Investors value growth potential, cash flow, and market dominance — not just current margins. Amazon deliberately ran razor-thin or negative net margins for years to reinvest in logistics, cloud infrastructure (AWS), and market share. AWS itself has very high margins and now subsidizes the retail side. High-volume, low-margin businesses can still generate enormous absolute dollars of profit and build defensible competitive moats that justify premium valuations.