What is a good profit margin?

It varies by industry. Software/SaaS companies average 70-80% gross margins. Retail averages around 50%. Restaurants typically run 3-9%. Manufacturing is 25-35%. Generally, a gross margin above 50% is considered strong, and above 20% is considered healthy for most industries.

What is the formula for gross profit margin?

Gross Profit Margin = ((Revenue - Cost of Goods Sold) / Revenue) x 100. This gives you the percentage of each dollar of revenue that you keep after covering direct costs. For example, $10,000 revenue with $6,500 cost gives a 35% margin.

Can profit margin be negative?

Yes. If your cost of goods sold exceeds your revenue, you have a negative profit margin, meaning you are losing money on each sale. This calculator shows a warning when your margin is negative and displays the loss amount.

How do I improve my profit margin?

You can improve profit margin by increasing prices (if the market allows), reducing cost of goods sold (negotiate with suppliers, improve efficiency), increasing sales volume to spread fixed costs, or shifting your product mix toward higher-margin items.

Is this calculator accurate for my business?

Yes, the formulas are standard accounting formulas used worldwide. For the most accurate results, include all direct costs (materials, labor, shipping) in your cost figure. Overhead and fixed costs are typically excluded from gross margin calculations.

Should I focus on margin or markup?

Use margin for financial analysis and reporting — it shows what percentage of revenue is profit. Use markup for pricing decisions — it tells you how much to add to your costs. Both measure the same profit but from different perspectives.

What's the difference between gross and net profit margin?

Gross margin only subtracts direct costs (COGS). Net margin subtracts all expenses including overhead, salaries, rent, marketing, and taxes. Net margin is always lower than gross margin and represents true bottom-line profitability.

finance

Profit Margin Calculator

Calculate gross profit margin, markup percentage, and profit in dollars. Enter revenue and COGS for a complete profitability breakdown.

Last updated: March 31, 2026

Revenue

Cost of Goods

Disclaimer: This calculator provides estimates for educational purposes only. It does not constitute financial advice. Consult a qualified financial professional for business decisions.

How to Use This Calculator

Enter your total revenue (sales income) in the Revenue field.
Enter your cost of goods sold (COGS) in the Cost field.
Click Calculate to see your gross margin, markup, and profit.
Review the breakdown showing margin percentage, markup percentage, and dollar profit.
Use the results to compare against industry benchmarks in the Quick Facts sidebar.

Real-World Examples

E-commerce Product Pricing

You sell handmade candles for $28 each. Materials cost $8, packaging $2, and shipping averages $3. Total cost: $13 per unit.

Result: Gross profit: $15.00. Gross margin: 53.6%. Markup: 115.4%. For every dollar of revenue, you keep 54 cents.

Service Business Margins

A freelance designer charges $5,000 for a branding project. Software costs $50/month, and the project takes 40 hours at an opportunity cost of $75/hour.

Result: Total cost: $3,050. Gross profit: $1,950. Gross margin: 39.0%. Healthy for service work.

Retail Store Performance

Your boutique had $85,000 in monthly sales. The wholesale cost of goods sold was $42,500.

Result: Gross profit: $42,500. Gross margin: 50.0%. Markup: 100%. Right on target for retail industry average.

Common Mistakes to Avoid

Confusing markup with margin — a 50% markup is only a 33% margin, not 50%.
Forgetting to include all costs (shipping, packaging, overhead) when calculating true margin.
Using revenue instead of cost as the base when calculating markup percentage.
Comparing margins across different industries — a 10% margin in grocery is excellent, but poor in software.

The Formula

Gross Margin = ((Revenue - Cost) / Revenue) x 100. Markup = ((Revenue - Cost) / Cost) x 100. Gross Profit = Revenue - Cost.

Learn More

Finance

Markup vs Margin: The Difference That Costs Thousands

Markup and margin are not the same. Confuse them and you'll misprice everything.

April 3, 2026

Frequently Asked Questions

Profit margin is your profit as a percentage of revenue (selling price). Markup is your profit as a percentage of cost. For example, if you buy for $60 and sell for $100, your margin is 40% (40/100) but your markup is 66.7% (40/60). Margin is always lower than markup for the same transaction.

Methodology & Sources

Gross margin = (Revenue - Cost) / Revenue × 100. Net margin = Net Profit / Revenue × 100. Markup = (Revenue - Cost) / Cost × 100. Standard accounting definitions.