Profit Margin Calculator
Instantly calculate your business profitability. Determine gross margin, net margin, markup, and profit amounts to make smarter pricing decisions.
Basic Pricing
Advanced Options
Additional costs beyond the product cost
For after-tax profit calculation
What Is Profit Margin?
Profit margin is the percentage of revenue that remains after subtracting all costs. It's one of the most important financial metrics used to measure a business's profitability and efficiency. Higher profit margins indicate better financial health and more effective cost management.
How to Calculate Profit Margin
Profit Margin = (Revenue – Cost) / Revenue × 100
This formula gives you the gross profit margin, which shows the percentage of revenue that remains after accounting for the cost of goods sold.
Example:
If your product sells for $120 and costs $80 to make:
Profit = $120 – $80 = $40
Profit Margin = ($40 ÷ $120) × 100 = 33.3%
Types of Profit Margin
Gross Margin
Profit after cost of goods sold (COGS)
(Revenue – COGS) ÷ Revenue × 100
Operating Margin
Profit after operating expenses
Operating Income ÷ Revenue × 100
Net Margin
Profit after all expenses and taxes
Net Income ÷ Revenue × 100
Profit Margin Benchmarks by Industry
How to Improve Your Profit Margin
Cost Reduction Strategies
- • Negotiate better supplier pricing
- • Optimize production processes
- • Reduce waste and inefficiencies
- • Buy in bulk when possible
- • Automate repetitive tasks
Revenue Enhancement Strategies
- • Increase prices strategically
- • Focus on high-margin products
- • Add value-added services
- • Improve average order value
- • Target premium market segments
Frequently Asked Questions
What is a good profit margin for a small business?
A good profit margin varies by industry, but generally, a net profit margin of 10-20% is considered healthy for most small businesses. High-margin businesses like SaaS may aim for 60-80%, while retail might be satisfied with 2-5%.
How do I calculate markup vs. margin?
Markup is calculated as a percentage of cost: (Profit ÷ Cost) × 100. Margin is calculated as a percentage of selling price: (Profit ÷ Revenue) × 100. Markup is always higher than margin for the same profit amount.
What is a net profit margin?
Net profit margin is the percentage of revenue that remains after all expenses, including operating costs, taxes, and interest, have been deducted. It represents the actual profitability of the business.
What is the difference between gross and net margin?
Gross margin only considers the cost of goods sold, while net margin accounts for all expenses including operating costs, taxes, and interest. Net margin provides a more complete picture of profitability.
How do taxes affect profit margin?
Taxes reduce your net profit margin but don't affect gross margin. The after-tax profit margin shows what percentage of revenue actually remains as profit after all tax obligations are met.