Profit Margin Calculator

Calculate gross, net, or operating profit margin instantly. Enter your revenue and costs to get your margin percentage with full step-by-step working.

Total sales / turnover
Direct production costs
Total sales / turnover
Profit after all expenses & tax
Total sales / turnover
Profit before interest & tax

What Is Profit Margin?

Profit margin is the percentage of revenue that remains as profit after deducting costs. It is one of the most important metrics in business finance — showing how efficiently a company converts sales into actual profit. A higher profit margin means more of each dollar earned is kept as profit.

There are three types of profit margin, each revealing a different layer of business performance. Understanding when to use a gross profit margin calculator versus a net or operating one depends on what you are trying to measure.

Gross Profit Margin

(Revenue − COGS)
÷ Revenue × 100

Measures production efficiency. Excludes operating costs, taxes, and interest.

Net Profit Margin

Net Profit
÷ Revenue × 100

The "bottom line" — profit after every expense, including tax and interest.

Operating Profit Margin

Operating Profit
÷ Revenue × 100

Core operational efficiency, before financing and tax decisions.

How to Calculate Profit Margin

All three profit margin formulas share the same structure: divide a profit figure by revenue and multiply by 100. The difference is which profit figure you use. Here is how to calculate each type step by step.

How to Calculate Gross Profit Margin

Gross Profit Margin = (Revenue − COGS) ÷ Revenue × 100

Step 1: Subtract cost of goods sold (COGS) from revenue to get gross profit.
Step 2: Divide gross profit by revenue.
Step 3: Multiply by 100 to get the percentage.

Example: Revenue $200,000, COGS $120,000 → Gross profit = $80,000 → Gross margin = 80,000 ÷ 200,000 × 100 = 40%

How to Calculate Net Profit Margin

Net Profit Margin = Net Profit ÷ Revenue × 100

Net profit is what remains after deducting all expenses — COGS, operating costs, salaries, rent, interest, and taxes. This is the true "bottom line" figure from your income statement.

Example: Revenue $200,000, Net profit $18,000 → Net margin = 18,000 ÷ 200,000 × 100 = 9%

How to Calculate Operating Profit Margin

Operating Profit Margin = Operating Profit ÷ Revenue × 100

Operating profit (also called EBIT) excludes interest and tax. It shows how efficient the core business is, independent of how it is financed.

How to calculate profit margin in Excel: For gross margin use =(B1-C1)/B1 where B1 is revenue and C1 is COGS. For net margin use =D1/B1 where D1 is net profit. Format the cell as a percentage. To calculate profit margin percentage in Excel as a plain number, add *100 to either formula. Both work identically in Google Sheets.

Profit Margin Examples

Click any example to load it into the calculator and see the full step-by-step working.

Revenue $50k, COGS $30k
40% gross
Gross profit: $20,000
Revenue $200k, COGS $80k
60% gross
Gross profit: $120,000
Revenue $100k, Net profit $8k
8% net
Typical retail range
Revenue $500k, Net profit $75k
15% net
Healthy service business
Revenue $300k, Op. profit $45k
15% operating
Before interest & tax
Revenue $80k, COGS $72k
10% gross
Low-margin product business

Real-World Profit Margin Scenarios

Restaurant: A restaurant earns $420,000 in annual revenue. Food and beverage costs (COGS) total $168,000. Gross profit margin = (420,000 − 168,000) / 420,000 × 100 = 60%. After rent, wages, utilities, and taxes totalling $378,000, net profit is $42,000. Net profit margin = 42,000 / 420,000 × 100 = 10%.

Retail store: A clothing retailer generates $1,200,000 in revenue. Products cost $720,000 to source (COGS), giving a gross margin of 40%. Operating expenses of $360,000 leave an operating profit of $120,000 — a 10% operating margin. This is typical of a well-run retail business. If your margins are declining, the percentage decrease calculator can quantify the drop.

SaaS product: A software company earns $800,000 in revenue with very low COGS of $80,000 (hosting and support costs), giving an exceptional gross margin of 90%. After sales, marketing, and R&D costs, net profit is $160,000 — a 20% net margin. High gross margins are characteristic of software businesses.

When Do You Need a Profit Margin Calculator?

Understanding how to calculate profit margin is essential in virtually every business context. Here are the most common use cases.

Pricing Products

Work backwards from your target profit margin to set the right selling price. If your costs are $60 and you want a 40% gross margin, the selling price must be at least $100. The markup percentage calculator is the complement tool for this calculation.

Investor Reporting

Investors and lenders compare gross, net, and operating margins against industry benchmarks to assess profitability and efficiency. Having accurate profit margin calculations is essential for any funding pitch or financial report.

Retail & E-commerce

Track margin per product, per category, and across seasons. A retail profit margin calculator helps identify which products are genuinely profitable after all costs are included — not just those with the highest selling price.

Restaurant & Hospitality

Food cost percentage and overall margin are the two most critical metrics in hospitality. Use this as a restaurant profit margin calculator to monitor whether food and labour costs are eating into revenue as the business scales.

Freelancers & Agencies

Service businesses often overlook true costs. Calculate net margin after accounting for software subscriptions, subcontractors, and unbillable time to understand the real profit margin percentage on each project or client.

Business Performance Tracking

Compare current margins to previous periods to spot trends. If your net margin is shrinking, use the percentage decrease calculator to quantify how much it has fallen and set a target for recovery.

Profit Margin vs. Markup — What Is the Difference?

This is one of the most common sources of confusion in pricing. Both profit margin and markup involve the same numbers — cost and selling price — but they are calculated differently and produce different percentages.

Profit Margin

Profit margin divides profit by the selling price (revenue). A product that costs $60 and sells for $100 has a profit of $40 and a margin of 40/100 × 100 = 40%.

Markup

Markup divides profit by the cost price. The same product: $40 profit ÷ $60 cost × 100 = 66.7% markup. The same product, but a completely different percentage. Using markup when you mean margin — or vice versa — leads to serious pricing errors. Use our markup percentage calculator when you need to work from cost to selling price.

Gross vs. Net Profit Margin

Gross margin only removes the direct cost of producing or sourcing the product (COGS). Net margin removes everything — overheads, salaries, rent, interest, and taxes. A business can have a strong 60% gross margin but a weak 3% net margin if its operating costs are very high. Both figures are needed for a complete picture of financial health.

Frequently Asked Questions

How do you calculate profit margin?
Divide your profit figure by revenue and multiply by 100. For gross profit margin: (Revenue − COGS) / Revenue × 100. For net profit margin: Net Profit / Revenue × 100. For example, $15,000 net profit on $100,000 revenue = 15% net profit margin. Use the calculator above to get instant results with step-by-step working.
How do I calculate gross profit margin?
Subtract cost of goods sold (COGS) from revenue to get gross profit, then divide by revenue and multiply by 100. Example: Revenue $80,000 minus COGS $48,000 = gross profit $32,000. Gross margin = 32,000 / 80,000 × 100 = 40%. Use the Gross Margin tab in the calculator above for instant results.
How do I calculate net profit margin?
Net Profit Margin = Net Profit / Revenue × 100. Net profit is revenue minus all expenses — COGS, operating costs, interest, and taxes. If your income statement shows $12,000 net profit on $150,000 revenue, the net profit margin is 8%. Use the Net Margin tab in the calculator above.
How do I calculate profit margin in Excel?
For gross margin: put revenue in A1, COGS in B1, and enter =(A1-B1)/A1 in C1. Format C1 as a percentage. For net margin: put net profit in B1 and use =B1/A1. To calculate profit margin percentage in Excel as a plain number, use =(A1-B1)/A1*100. These formulas work identically in Google Sheets and LibreOffice Calc.
What is a good profit margin?
It depends heavily on the industry. Software and SaaS: net margins of 15–25% are common. Retail: 2–6% net is typical. Restaurants: 3–9% net. Professional services: 10–20%. Gross margins above 50% are generally strong across most industries. Always compare against your specific industry benchmark rather than a universal standard.
What is the difference between profit margin and markup?
Profit margin divides profit by the selling price. Markup divides profit by the cost price. A product costing $60 that sells for $100 has a 40% margin but a 66.7% markup. They describe the same situation in different ways. Margin is used in financial reporting; markup is used in pricing. Never substitute one for the other.
How do I calculate operating profit margin?
Operating Profit Margin = Operating Profit / Revenue × 100. Operating profit is calculated by subtracting COGS and operating expenses from revenue, but before deducting interest and taxes. It is also called EBIT (Earnings Before Interest and Tax). Use the Operating Margin tab in the calculator above.
How do I calculate profit margin percentage for a product?
Use: (Selling Price − Cost) / Selling Price × 100. For a product that costs $25 to make and sells for $60: (60 − 25) / 60 × 100 = 58.3% gross profit margin. This is the standard formula for calculating profit margin percentage on individual products, used in retail, e-commerce, and manufacturing.

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