Gross Margin Calculator
Calculate gross profit margin percentage from revenue and cost of goods sold.
Essential for pricing strategy and business health analysis.
What Is Gross Margin?
Gross margin (also called gross profit margin) measures how much profit remains from revenue after subtracting the direct cost of producing goods or services. It is one of the most important indicators of business financial health.
The Formula
Gross Profit = Revenue − Cost of Goods Sold (COGS)
Gross Margin % = (Gross Profit ÷ Revenue) × 100
What Counts as COGS?
Cost of Goods Sold includes only direct costs tied to production:
- Raw materials
- Direct manufacturing labor
- Factory overhead
It does NOT include indirect costs like marketing, office rent, or salaries of non-production staff.
Gross Margin Benchmarks by Industry
| Industry | Typical Gross Margin |
|---|---|
| Software / SaaS | 70% – 90% |
| Retail (general) | 25% – 45% |
| Restaurants | 60% – 70% |
| Manufacturing | 25% – 35% |
| Grocery stores | 25% – 30% |
| Consulting | 60% – 80% |
| Pharmaceuticals | 60% – 75% |
Practical Example
A product sells for $150. The materials and direct labor cost $60 to produce.
- Gross Profit = $150 − $60 = $90
- Gross Margin = ($90 ÷ $150) × 100 = 60%
This means for every dollar of revenue, 60 cents is available to cover operating expenses and profit.
Gross Margin vs Markup
These are often confused:
- Gross margin = profit as a % of selling price
- Markup = profit as a % of cost
A 50% markup ($10 cost → $15 price) = 33% gross margin. A 100% markup ($10 cost → $20 price) = 50% gross margin.
Why It Matters
Low gross margins leave little room for operating expenses, marketing, and profit. Improving gross margin means either raising prices or reducing production costs.
Gross Margin vs Net Margin
Gross margin only subtracts COGS. Net margin subtracts everything: COGS, operating expenses, marketing, salaries, taxes, and interest. A business can have a healthy gross margin and still post a poor net margin if overhead is too high. A SaaS company at 85% gross margin can still lose money if it spends 100% of revenue on sales and marketing to grow.
Tracking gross margin month over month is one of the cleanest early warnings for pricing problems, supplier cost creep, or product mix shifts. If COGS as a fraction of revenue starts drifting up two or three months in a row, something has changed in your supply chain or your customers are buying lower-margin SKUs.
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
SuperGlobalCalculator is independently built and maintained. See how we build and verify our calculators.