How do you calculate profit margin?

Profit margin is calculated by dividing profit by revenue and multiplying by 100. For gross profit margin: (Revenue - COGS) / Revenue × 100. For net profit margin: Net Profit / Revenue × 100. For example, if you sell a product for $100 and it cost you $60 to make, your gross profit is $40 and your gross margin is 40%.

What is the difference between gross margin and net margin?

Gross margin only subtracts the direct cost of making or buying the product (COGS) from revenue. Net margin subtracts all expenses — including operating costs, interest, and taxes — from revenue. Net margin is always lower than gross margin and shows the true bottom-line profitability of a business.

What is the difference between margin and markup?

Margin is profit as a percentage of selling price (revenue). Markup is profit as a percentage of cost. For example, if a product costs $60 and sells for $100, the margin is 40% but the markup is 66.7%. Margin is always lower than markup for the same transaction. Businesses use margin to measure profitability and markup to set prices.

What is a good profit margin?

A good profit margin depends on the industry. Retail businesses typically see net margins of 2–5%. Software companies can achieve 20–40%. Restaurants average 3–9%. Service businesses often range from 10–20%. A gross margin above 50% is generally healthy for most industries. Always compare your margin to industry benchmarks rather than a single universal number.

How do I find the selling price if I know the cost and desired margin?

Use the formula: Selling Price = Cost / (1 - Desired Margin). For example, if your cost is $60 and you want a 40% margin, the selling price = $60 / (1 - 0.40) = $60 / 0.60 = $100. This tool has a reverse calculator mode that does this math for you automatically.

Profit Margin Calculator

Enter your revenue and cost to instantly see gross margin, net margin, markup %, and more. Works for any product, service, or business size.

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Revenue (Selling Price) $

Total money received from sales

Cost of Goods Sold (COGS) $

Direct cost to make or buy the product

Currency Symbol

Industry (optional)

Operating Expenses $

Rent, salaries, utilities, marketing — not included in COGS

Tax Rate (%)

Corporate or income tax rate

Interest / Other Exp. $

Your Margin Breakdown

Fill in your revenue and cost on the left and click Calculate to see your profit margin breakdown.

Gross Profit Margin

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Gross Profit: —

CostProfit

Full Breakdown

Revenue —

Cost of Goods Sold —

Gross Profit —

Gross Margin % —

Markup % —

Operating Expenses —

Operating Profit Margin —

Interest / Other Exp. —

Tax —

Net Profit Margin —

Net Profit —

Break-Even Revenue —

Industry Benchmark (Gross) —

Revenue Breakdown

Margin vs Industry Average

What Is Profit Margin?

Profit margin tells you what portion of each sale you actually keep as profit. It is expressed as a percentage of revenue. A 50% gross margin means for every $100 in sales, $50 goes to covering your costs and $50 is left over before other expenses.

There are three main types: gross margin (revenue minus direct production costs), operating margin (also subtracts operating expenses like rent and salaries), and net margin (what is left after everything — including taxes).

Understanding your margin helps you price products correctly, compare performance across periods, and know if your business model is actually sustainable.

Profit Margin Formulas

The key formulas you need:

Gross Profit = Revenue − COGS
Gross Margin % = Gross Profit ÷ Revenue × 100
Markup % = Gross Profit ÷ COGS × 100
Operating Margin % = (Gross Profit − Opex) ÷ Revenue × 100
Net Margin % = Net Profit ÷ Revenue × 100

Example: Revenue = $10,000. COGS = $6,000. Gross Profit = $4,000. Gross Margin = 40%. Markup = 66.7%.

Margin vs Markup — What's the Difference?

Many business owners confuse margin and markup. They look similar but are calculated differently and can lead to big pricing mistakes if mixed up.

Item Costs	Selling Price	Gross Margin %	Markup %
$50	$100	50.0%	100.0%
$60	$100	40.0%	66.7%
$75	$100	25.0%	33.3%
$80	$100	20.0%	25.0%
$90	$100	10.0%	11.1%

Margin is always lower than markup for the same product. Margin uses selling price as the base; markup uses cost as the base.

Typical Margins by Industry

Margin expectations vary a lot depending on the business type. Compare your numbers to these common ranges:

Industry	Typical Gross Margin	Typical Net Margin
Software / SaaS	65–80%	15–30%
Consulting / Services	55–70%	15–25%
Finance / Insurance	70–85%	18–28%
Healthcare	40–60%	8–15%
E-commerce	35–50%	3–8%
Retail	25–45%	2–5%
Restaurant / Food	60–70%	3–9%
Manufacturing	20–35%	5–12%
Construction	15–25%	2–6%
Wholesale	15–25%	1–4%

Frequently Asked Questions

Subtract your cost of goods sold from your revenue to get gross profit. Then divide gross profit by revenue and multiply by 100. For example: Revenue = $500, COGS = $300. Gross Profit = $200. Gross Margin = 200 ÷ 500 × 100 = 40%.

Gross margin only subtracts the direct cost of making or buying what you sell (COGS). Net margin subtracts everything — COGS, rent, salaries, utilities, interest, and taxes. Net margin shows the true profitability left after all business costs are paid. A business can have a 60% gross margin but only a 5% net margin if overhead costs are high.

They use different bases. Margin divides profit by the selling price. Markup divides profit by the cost. For the same product, markup is always numerically higher than margin. Example: Cost = $60, Sell = $100. Profit = $40. Margin = 40/100 = 40%. Markup = 40/60 = 66.7%. This is not an error — they measure different things.

Use the reverse margin formula: Selling Price = Cost ÷ (1 − Target Margin). If your cost is $60 and you want a 40% margin: Price = 60 ÷ (1 − 0.40) = 60 ÷ 0.60 = $100. Use the "Find Selling Price" mode in this calculator to do this instantly without the math.

There is no single number that works for every business. Net margins of 10% or higher are generally considered healthy for most small businesses. Service businesses typically achieve higher net margins (15–25%) because they have lower material costs. Physical product businesses are often closer to 5–15%. Comparing yourself to your industry average is more useful than comparing to a universal benchmark.

Contribution margin subtracts only the variable costs of a product (direct materials, commissions, packaging) from revenue. Gross margin typically subtracts all COGS including some fixed manufacturing costs. Contribution margin is especially useful for decisions like whether to accept a special order or which product line to prioritize when capacity is limited.

Gross Profit at Different Revenue & Margin Levels

Shows gross profit in $ for combinations of revenue and margin percentage.

Revenue $	10% Margin	20% Margin	30% Margin	40% Margin common target	50% Margin	60% Margin

Gross profit = Revenue × Margin %. These figures exclude operating expenses and taxes.

What Selling Price Do You Need?

Given your cost and a target gross margin, shows the required selling price. Formula: Price = Cost ÷ (1 − Margin).

Cost $	20% Margin	30% Margin	40% Margin popular target	50% Margin	60% Margin	70% Margin

Highlighted column (40%) is a common gross margin goal for product-based businesses.

Markup % → Gross Margin % Conversion

Many retailers set prices using markup. This table shows the equivalent gross margin for each markup percentage.

Markup %	Gross Margin %	Cost $100 → Selling Price	Profit on $100 Cost

Markup % is always higher than the equivalent margin %. They are NOT interchangeable.

Break-Even Revenue by Fixed Costs & Gross Margin

Break-Even Revenue = Fixed Costs ÷ Gross Margin %. Shows how much revenue you need to cover fixed costs.

Fixed Costs $	20% Margin	30% Margin	40% Margin	50% Margin	60% Margin best case

Higher gross margins mean you need less revenue to break even on your fixed costs.

Global Industry Gross & Net Margin Benchmarks

Average profit margins vary widely by sector. Use these figures to see where your business stands.

Industry	Avg Gross Margin	Avg Net Margin	Key Driver
Software / SaaS	72%	25%	Low COGS, recurring revenue
Finance & Insurance	80%	22%	Interest income, fees
Consulting / Services	60%	20%	Low material cost
Healthcare	48%	10%	High labor, regulation
E-commerce	42%	5%	Shipping, returns
Restaurant / Food	65%	6%	High labor & overhead
Retail — General	35%	3.5%	High volume, competition
Manufacturing	28%	8%	Raw materials, labor
Construction	20%	5%	Materials, subcontractors
Wholesale / Distribution	22%	2.5%	Thin spreads, volume
Automotive Dealers	15%	2%	High cost inventory
Grocery / Supermarket	25%	1.5%	Extreme competition

These are global averages from publicly reported data. Individual businesses vary significantly based on scale, location, and strategy.