Profit Margin Calculator: Understand Your Business Profitability

Profit margin reveals what percentage of revenue becomes profit. Understanding margins helps you price products correctly and identify cost issues.

Gross vs Net Profit Margin

Gross Margin: (Revenue - COGS) / Revenue × 100. Shows profitability of core products.
Net Margin: Net Income / Revenue × 100. Shows overall profitability after all expenses.

If you sell a product for $100 and it costs $60 to make, your gross profit is $40. Gross margin = $40 / $100 × 100 = 40%.

Varies by industry: Restaurants 3-5%, retail 25-50%, software 70-85%. Compare your margins to industry averages.

Margin is profit as a percentage of selling price. Markup is profit as a percentage of cost. A 40% margin equals a 66.7% markup on the same product.

Reduce costs (negotiate with suppliers, improve efficiency) or increase prices (if market allows). Even small improvements compound significantly.

Frequently Asked Questions

What is a good profit margin?

It depends on industry. General benchmarks: 5% is low, 10% is average, 20% is high. Compare to your specific industry averages.

How do I increase my profit margin?

Reduce COGS (better supplier deals, efficiency), reduce operating expenses, or increase prices. Focus on high-margin products.

What is the difference between margin and markup?

Margin = profit / selling price. Markup = profit / cost. Same $40 profit on $100 sale: margin is 40%, markup is 66.7% ($40/$60).