Profit Margin Calculator
This profit margin calculator finds both your gross and net profit margin from revenue, cost of goods sold, and operating expenses — two different but complementary views of how profitable your business really is. Enter your numbers to see both.
Total sales for the period.
Direct costs of producing what you sold.
Rent, salaries, marketing and other overhead — not included in COGS.
Gross profit margin
60.00%
How to use this profit margin calculator
- 1Revenue: total sales for the period you're analyzing.
- 2Cost of goods sold (COGS): direct costs of producing or delivering what you sold — materials, direct labor, and similar.
- 3Operating expenses: overhead not directly tied to production — rent, salaries, marketing, admin costs.
Understanding your results
Gross profit margin shows how much you keep after direct production costs alone — a measure of pricing power and production efficiency. Net profit margin goes further, subtracting all operating expenses too — the real bottom-line profitability after everything it costs to run the business, not just make the product.
The formula
Gross margin = (Revenue − COGS) ÷ Revenue × 100 · Net margin = (Gross profit − OpEx) ÷ Revenue × 100Gross profit is revenue minus the direct cost of producing what was sold — this margin shows pricing efficiency independent of how the rest of the business is run. Net profit subtracts operating expenses from gross profit, capturing the full cost of running the business (not just producing the product) to arrive at true bottom-line profitability as a percentage of revenue.
A worked example
$250,000 in revenue with $100,000 COGS gives a gross profit of $150,000 — a 60% gross margin. Subtracting $80,000 in operating expenses leaves a net profit of $70,000 — a 28% net margin, showing that overhead costs consume roughly half of the gross profit in this scenario.
Notes for the UK, US and India
'Good' margins vary enormously by industry — software businesses often see 70-90% gross margins, while grocery retail commonly runs 20-30% gross margins with razor-thin net margins. Compare your margins against your specific industry's benchmarks, not a generic target.
Frequently asked questions
What's a good profit margin?+
It depends heavily on your industry — a 10% net margin might be excellent in grocery retail but poor in software. Compare against industry-specific benchmarks rather than a universal number.
Why is gross margin usually much higher than net margin?+
Gross margin only accounts for direct production costs. Net margin subtracts everything else — rent, salaries, marketing, admin — which for most businesses is a substantial additional cost that narrows the margin considerably.
Does this account for taxes?+
No — this is a pre-tax operating profitability view. A true after-tax net margin would subtract income tax as well, which varies by business structure and jurisdiction.
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