Calculate gross margin, net margin, and profit margin percentage.
Understanding your profit margin percentage is essential for business success. This tool quickly calculates gross profit margin, net profit margin, and net profit so you can make better pricing, discounting, and profitability decisions.
Enter values to calculate margins.
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Profit margin percentage is profit divided by revenue, multiplied by 100. Gross profit margin uses revenue minus COGS as profit. Net profit margin uses revenue minus COGS and operating expenses as profit.
Gross Margin (%) = ((Revenue - COGS) / Revenue) x 100
Net Margin (%) = ((Revenue - COGS - Operating Expenses) / Revenue) x 100
Example: $100,000 revenue, $60,000 COGS, and $15,000 operating expenses creates a 40% gross profit margin, 25% net profit margin, and $25,000 net profit.
The Profit Margin Calculator is a business tool used to calculate profit margin percentage by measuring profit as a percentage of revenue. It provides two key metrics for a comprehensive profitability analysis:
Profit margins are simple ratios that compare profit to revenue. Our calculator uses the following steps:
Gross Profit Margin
Gross Profit = Revenue − COGS
Gross Margin (%) = (Gross Profit ÷ Revenue) × 100
Net Profit Margin
Net Profit = Gross Profit − Operating Expenses
Net Margin (%) = (Net Profit ÷ Revenue) × 100
Consider a small software company with the following figures for the last quarter:
Total Revenue: $100,000
Cost of Goods Sold (COGS): $60,000
Operating Expenses (Salaries, Rent, Marketing): $15,000
1. Gross Profit Margin
Gross Profit: $100,000 − $60,000 = $40,000
Gross Margin: ($40,000 ÷ $100,000) × 100 = 40.00%
2. Net Profit Margin
Net Profit: $40,000 − $15,000 = $25,000
Net Margin: ($25,000 ÷ $100,000) × 100 = 25.00%
What constitutes a "good" profit margin varies widely by industry due to differences in COGS and operational structure. These are rough estimates for general reference:
| Industry | Typical Gross Margin | Typical Net Margin |
|---|---|---|
| Software / Tech | 70%, 90% | 15%, 30%+ |
| Retail / eCommerce | 30%, 50% | 5%, 10% |
| Restaurants / Food Service | 50%, 65% | 3%, 7% |
Divide profit by revenue and multiply by 100. For gross profit margin, use revenue minus COGS as profit. For net profit margin, use revenue minus COGS and operating expenses as profit.
Subtract COGS from revenue to get gross profit, divide gross profit by revenue, then multiply by 100. For example, $100,000 revenue minus $60,000 COGS equals $40,000 gross profit; $40,000 divided by $100,000 equals a 40% gross margin.
Subtract COGS and operating expenses from revenue to get net profit, divide net profit by revenue, then multiply by 100. For example, $25,000 net profit divided by $100,000 revenue equals a 25% net profit margin.
Gross margin measures product-level profitability after COGS. Net margin measures overall business profitability after COGS and operating expenses. Gross margin tells you if pricing and product costs work; net margin tells you if the whole operation is profitable.
A negative margin means the business is losing money. Negative gross margin means product cost is higher than sale price, while negative net margin means total expenses exceed revenue.
Accurate profitability analysis empowers better decision-making. Continue optimizing your business financials with the Markup Calculator for pricing, the Break-Even Point Calculator to manage costs, or the ROI Calculator to measure investment success.
Want the background and formulas behind this calculator? Read the companion guide.
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