Profit Margin Calculator

A profit margin tells you what percentage of your revenue is actual profit after costs. It is one of the most fundamental metrics in business finance, used by companies of all sizes to assess financial health, set pricing strategies, and make data-driven decisions.

Gross Margin vs Net Margin

Gross margin measures profitability after subtracting only the direct cost of goods sold (COGS), such as raw materials, manufacturing costs, and direct labor. It shows how efficiently a company produces its goods or services.

Net margin goes further by subtracting all expenses, including operating costs, taxes, interest, salaries, rent, and every other expense. It provides the most complete picture of overall profitability.

For example, a business with $100,000 in revenue and $60,000 in COGS has a gross margin of 40%. If total expenses including COGS are $85,000, the net margin is 15%.

Margin vs Markup: Key Difference

Many people confuse margin and markup, but they are different calculations. Margin is calculated as a percentage of the selling price (revenue), while markup is calculated as a percentage of the cost. A product that costs $50 and sells for $100 has a 50% margin but a 100% markup. Understanding this distinction is crucial for correct pricing.

Typical Profit Margins by Industry

• Software/SaaS: 70-90% gross margin, 15-25% net margin
• Retail: 25-50% gross margin, 2-5% net margin
• Restaurants: 60-70% gross margin, 3-9% net margin
• Manufacturing: 25-35% gross margin, 5-10% net margin
• Consulting: 50-80% gross margin, 15-25% net margin
• E-commerce: 40-60% gross margin, 5-15% net margin

How to Improve Your Profit Margins

• Negotiate better prices with suppliers to lower COGS
• Increase prices strategically based on value delivered
• Reduce operational overhead and unnecessary expenses
• Focus on high-margin products or services
• Improve operational efficiency and reduce waste
• Automate repetitive tasks to lower labor costs

Business Use Cases

Profit margin calculators are essential tools for entrepreneurs, business owners, accountants, financial analysts, and anyone involved in pricing decisions. Use this calculator to evaluate product pricing, compare profitability across product lines, prepare financial projections, and analyze competitor margins. Whether you are running a startup, managing a retail store, or planning an investment, understanding your margins is key to making informed financial decisions.