Gross Margin Calculator
Calculate gross margin percentage and gross profit from revenue and cost of goods sold (COGS).
Essential for pricing and profitability analysis.
Gross margin is one of the most fundamental measures of business profitability. It tells you what percentage of revenue remains after subtracting the direct costs of producing your goods or services — before operating expenses, taxes, or interest.
Formula: Gross Profit = Revenue − Cost of Goods Sold (COGS) Gross Margin % = (Gross Profit ÷ Revenue) × 100
What each variable means:
- Revenue — total income from sales before any deductions. Also called “top line” or “net sales.”
- Cost of Goods Sold (COGS) — direct costs tied to producing each unit: raw materials, direct labor, manufacturing overhead. Does NOT include marketing, rent, or administrative salaries.
- Gross Profit — what is left after subtracting production costs. This funds all other business expenses.
- Gross Margin % — the percentage of each dollar of revenue that is gross profit.
Industry benchmarks (approximate):
- Software / SaaS — 70–90% (very low COGS)
- Retail — 20–50% depending on category
- Grocery / food retail — 25–35%
- Restaurants — 60–70% on food alone (but net margins are thin after labor/rent)
- Manufacturing — 25–40%
- Automotive — 10–20%
Worked example: A company sells handmade candles. Revenue this month: $8,500. COGS (wax, wicks, jars, fragrance, packaging): $3,400.
Gross Profit = $8,500 − $3,400 = $5,100 Gross Margin = ($5,100 ÷ $8,500) × 100 = 60%
This means for every dollar of candle revenue, 60 cents remains to cover rent, marketing, salaries, and profit.
Gross margin vs. net margin: Gross margin only subtracts COGS. Net margin subtracts everything — COGS, operating expenses, taxes, interest. A business can have a healthy gross margin but a poor net margin if overhead is too high.
Tracking gross margin monthly reveals pricing problems, supplier cost creep, or inefficiencies before they become crises.