Profit Margin Calculator
Calculate gross margin, net margin, and markup from revenue and cost of goods.
Compare margin vs markup instantly and see break-even selling price.
Profit margin measures how much of each dollar of revenue a business actually keeps as profit. There are two key versions — gross margin and net margin — and each tells a different story about business health.
Gross Profit Margin: Gross Profit = Revenue − Cost of Goods Sold (COGS) Gross Margin % = (Gross Profit / Revenue) × 100
COGS includes the direct costs of making or acquiring the product: raw materials, manufacturing labor, and direct overhead. It does NOT include marketing, rent, salaries of office staff, or taxes.
Net Profit Margin: Net Profit = Revenue − All Expenses (COGS + Operating + Tax + Interest) Net Margin % = (Net Profit / Revenue) × 100
Net margin is the “bottom line” — what’s left after every expense is paid.
Worked example: A small business has:
- Revenue: $120,000
- COGS: $72,000
- Operating expenses: $28,000
- Tax: $4,000
Gross Profit = $120,000 − $72,000 = $48,000 Gross Margin = (48,000 / 120,000) × 100 = 40% Net Profit = $48,000 − $28,000 − $4,000 = $16,000 Net Margin = (16,000 / 120,000) × 100 = 13.3%
Typical benchmarks by industry:
- Grocery stores: gross ~25%, net ~2–3%
- Software (SaaS): gross ~70–80%, net ~15–25%
- Restaurants: gross ~65%, net ~3–9%
- Retail clothing: gross ~50%, net ~5–10%
- Manufacturing: gross ~35%, net ~5–8%
A high gross margin with a low net margin means high operating costs — a common sign that overhead is eating profits.