Profit Margin Calculator
Calculate gross profit, gross margin percentage, and markup from your revenue and costs.
Revenue & Costs
Profit Analysis
How Profit Margin Is Calculated
Gross profit margin measures what percentage of revenue remains after subtracting the direct cost of goods or services sold. The formula is (Revenue - Cost) / Revenue x 100. For example, if you sell a product for $50 that costs $30 to make, your gross profit is $20 and your gross margin is 40%.
Markup and margin are related but different. Markup is based on cost (profit / cost), while margin is based on revenue (profit / revenue). A 100% markup on a $30 item means you sell it for $60. That same transaction has a 50% margin. Higher margins indicate a business retains more revenue as profit.
Frequently Asked Questions
What is a good profit margin?
Profit margins vary significantly by industry. Software companies often see gross margins of 70-90%. Retail businesses typically have margins of 25-50%. Restaurants usually operate at 3-9% net margin. Grocery stores often run on razor-thin margins of 1-3%. Compare your margin to industry benchmarks rather than arbitrary targets.
What is the difference between gross margin and net margin?
Gross margin only considers the direct cost of producing your product or service (COGS). Net margin accounts for all expenses, including overhead, taxes, interest, and operating costs. A business can have a healthy 60% gross margin but only a 10% net margin after covering rent, salaries, and marketing.
How can I improve my profit margin?
There are two levers: increase revenue or decrease costs. On the revenue side, consider raising prices, upselling, or focusing on higher-margin products. On the cost side, negotiate better supplier terms, reduce waste, or improve operational efficiency. Even small margin improvements compound significantly at scale.