Profit Margin Calculator
Enter revenue, cost of goods sold and operating expenses to see gross profit, gross margin, net profit and net margin — the two numbers that describe a business’s health.
How to use the profit margin calculator
- Enter total revenue for the period you are analyzing.
- Enter cost of goods sold — only the costs directly tied to producing what you sold.
- Enter operating expenses: rent, salaries, software, marketing, everything else.
- Compare both margins against your industry’s typical range.
Formula
About this calculator
Gross margin and net margin answer different questions. Gross margin — what remains after direct production costs — measures whether the product itself is worth selling. Net margin measures whether the whole business is. A company can have a beautiful 70% gross margin and still lose money if operating expenses eat everything; that combination describes many failing SaaS startups and many successful consultancies alike, depending on scale.
Benchmarks vary enormously by industry, which is why comparisons only work within one. Grocery retail runs 1–3% net margins and survives on volume; software routinely clears 20%; luxury goods sit between. Knowing your industry’s normal range turns "is 12% good?" into an answerable question.
The most useful diagnostic is tracking both margins over time. Falling gross margin means production costs or pricing are slipping. Stable gross margin with falling net margin means overhead is growing faster than revenue. The two numbers together localize the problem before you have read a single line-item report.
Frequently asked questions
What is a good profit margin?
It depends on the industry: 5–10% net is respectable in retail and hospitality, 15–25% is strong in software and professional services. Compare within your sector, not across sectors.
Margin vs markup — what is the difference?
Markup is profit as a percentage of cost; margin is profit as a percentage of price. A 50% markup is only a 33% margin. Confusing them is a classic pricing error.
Should marketing count as COGS or opex?
Almost always opex — marketing is not required to produce an individual unit. The exception is per-order costs like shipping and payment processing, which belong in COGS.
Can net margin be higher than gross margin?
No, as long as operating expenses are positive. If your math shows that, an input is likely misclassified.