Profit Margin Calculator
Calculate gross profit margin, net profit margin, and operating margin. Find selling price from cost and desired margin.
💰 Business📐 Profit Margin % = (Revenue - Cost) / Revenue × 100
Revenue / Selling price ($)
Cost of goods or services ($)
Operating expenses ($, optional)
Please enter valid values.
Formula & Reference
| Variable | Formula | Units |
|---|---|---|
| Profit Margin Calculator | Profit Margin % = (Revenue - Cost) / Revenue × 100 | % |
Step-by-Step Examples
Example 1
Product Business
$10K revenue, $6.5K COGS, $2K operating expenses.
- Gross profit: $3,500 (35% margin)
- Operating income: $1,500 (15% op margin)
- Markup on cost: 53.8%
✓ 35% gross / 15% operating
Example 2
Service Business
$25K revenue, $5K cost, $8K operating expenses.
- Gross margin: 80% | Operating margin: 48%
✓ 80% gross / 48% operating
Example 3
Thin Margin Retail
$50K revenue, $42K COGS.
- Gross profit: $8,000 (16% margin)
- Typical retail range: 20-50% gross
✓ 16% gross margin
Real-World Applications
Business Owners
Track profitability across products and services.
CFOs
Monitor margin trends by business unit.
Salespeople
Calculate minimum selling price for any deal.
Accountants
Verify financial statements for margin accuracy.
Common Mistakes to Avoid
⚠️
Confusing markup and margin
50% markup ≠ 50% margin. Markup is profit/cost; margin is profit/revenue. A 100% markup = 50% margin. Always specify which you mean.
⚠️
Not including all costs in COGS
COGS should include all direct costs: materials, direct labor, shipping, packaging. Missing costs inflate margin and mislead pricing decisions.
Frequently Asked Questions
What is a good profit margin? ▾
Varies by industry. Software: 60-80% gross. Retail: 20-50%. Restaurants: 3-9% net. Manufacturing: 20-35% gross. Service businesses: 50-70% gross. Net margins above 10% are generally strong.
Gross vs net profit margin? ▾
Gross margin = (Revenue - COGS) / Revenue. Net margin = Net income / Revenue (after ALL expenses including taxes). Gross is better for product/pricing decisions; net shows overall business health.
How to improve profit margin? ▾
Raise prices (even 5-10% has large margin impact). Reduce COGS through supplier negotiation or efficiency. Increase volume to spread fixed costs. Cut underperforming products/services.