What is the difference between gross and net profit margin?

Gross profit margin only considers the cost of goods sold (COGS), while net profit margin accounts for all expenses including operating costs, taxes, and interest.

How do you calculate profit margin?

Profit Margin = (Revenue - Cost) / Revenue × 100. For gross profit margin, use COGS as the cost. For net profit margin, use total expenses.

How can I improve my profit margins?

Improve profit margins by: 1) Negotiating better supplier prices, 2) Reducing operational costs, 3) Increasing prices strategically, 4) Improving inventory turnover, 5) Upselling and cross-selling.

Free Profit Margin Calculator

Calculate Your Profit Margin

Enter or edit any 2 values - the calculator will automatically update the rest in real-time.

Cost (COGS)

$

Margin (%)

%

Revenue (Sales Price)

$

Profit

$

💡 Tip: You can edit any field at any time - the calculator will automatically recalculate the other values!

How to Use This Calculator

This flexible calculator works with any 2 values. Enter any combination and it will calculate the rest:

Example 1: Know Cost + Margin?

Enter Cost ($600) and desired Margin (40%) → Get Revenue ($1,000) and Profit ($400)

Example 2: Know Revenue + Cost?

Enter Revenue ($1,000) and Cost ($600) → Get Profit ($400) and Margin (40%)

Example 3: Know Profit + Margin?

Enter Profit ($400) and Margin (40%) → Get Revenue ($1,000) and Cost ($600)

Example 4: Know Cost + Profit?

Enter Cost ($600) and Profit ($400) → Get Revenue ($1,000) and Margin (40%)

Understanding the Formulas

Basic Relationships

Profit = Revenue - Cost

Revenue = Cost + Profit

Cost = Revenue - Profit

The fundamental relationship between the three core values.

Profit Margin (Gross Margin)

Margin % = (Profit / Revenue) × 100

Revenue = Profit / (Margin % / 100)

Profit = Revenue × (Margin % / 100)

The percentage of revenue that becomes profit. Shows how much of each dollar you keep.

Markup Percentage

Markup % = (Profit / Cost) × 100

Profit = Cost × (Markup % / 100)

The percentage added to cost to determine selling price. Shows how much you're marking up from cost.

Converting Between Margin and Markup

Revenue = Cost / (1 - Margin % / 100)

Cost = Revenue × (1 - Margin % / 100)

Use these when you know cost and desired margin, or revenue and desired margin.

Industry Benchmarks

Industry	Typical Gross Margin	Typical Net Margin
Retail (General)	25-50%	2-5%
E-commerce	40-60%	5-10%
Restaurants	60-70%	3-6%
Software/SaaS	70-90%	10-25%
Wholesale	15-30%	2-4%

Frequently Asked Questions

What is a good profit margin?

A good profit margin varies by industry. Generally, a net profit margin of 10% is average, 20% is good, and 30%+ is excellent. Gross profit margins are typically higher, with 50%+ being common in retail.

What's the difference between margin and markup?

Margin is profit as a percentage of revenue (selling price), while markup is profit as a percentage of cost. A 50% markup equals a 33% margin. They're related but not the same!

Should I focus on margin or markup?

Both are useful. Use markup when setting prices (e.g., "I'll mark this up 100%"). Use margin when analyzing profitability (e.g., "My business has a 40% margin").

How can I improve my profit margin?

Increase prices, reduce costs, negotiate better supplier rates, reduce waste, improve operational efficiency, or focus on higher-margin products.

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Profit Margin Calculator