Profit Margin Calculator
Calculate your gross profit margin, markup percentage, and net profit instantly. Enter your total revenue and cost of goods sold below.
What Is Profit Margin?
Profit margin measures how much of each dollar of revenue your business retains as profit. The gross profit margin formula is straightforward: subtract your cost of goods sold (COGS) from revenue, then divide by revenue and multiply by 100. If you sell a product for $100 and it costs $60 to produce, your gross profit is $40 and your gross margin is 40%.
Margin is one of the most important metrics in business because it determines whether a company can cover its operating expenses and remain profitable at scale. Even a business with high revenue can fail if margins are too thin to absorb overhead costs.
Profit Margin vs. Markup Reference Table
| Markup % | Margin % | Example: $50 Cost |
|---|---|---|
| 25% | 20% | $62.50 |
| 50% | 33.3% | $75.00 |
| 67% | 40% | $83.50 |
| 100% | 50% | $100.00 |
| 150% | 60% | $125.00 |
| 200% | 66.7% | $150.00 |
Margin vs. Markup: The Key Difference
Margin and markup are related but calculated differently. Margin divides profit by revenue (selling price). Markup divides profit by cost. Both use the same profit figure, but the denominator changes. This means markup is always a higher percentage than margin for the same transaction.
The confusion between these two metrics costs businesses money. A retailer who aims for a "50% margin" but applies a 50% markup will actually achieve only a 33.3% margin — earning significantly less than planned. Always confirm which metric is being used when discussing pricing with partners or in financial models.
Frequently Asked Questions
What is profit margin?
Profit margin is the percentage of revenue that remains after deducting costs. Gross margin = (Revenue − COGS) / Revenue × 100. A 40% gross margin means you keep $0.40 of every dollar in revenue after paying for goods sold. Net margin also subtracts operating expenses, interest, and taxes.
What is a good profit margin?
It depends heavily on industry. Software/SaaS: 70–90% gross margin. Retail: 20–50% gross margin. Restaurants: 3–9% net margin. Manufacturing: 10–20% gross margin. Generally, higher margins indicate more pricing power and operational efficiency. Compare your margin to industry benchmarks rather than a universal target.
What is the difference between margin and markup?
Margin is profit divided by revenue. Markup is profit divided by cost. Example: buy at $60, sell at $100. Profit = $40. Margin = $40/$100 = 40%. Markup = $40/$60 = 66.7%. Margin is always lower than markup for the same transaction. Confusing the two is a common pricing mistake that leads to undercharging.
How do I increase profit margin?
Three levers: (1) Raise prices — even a 1% price increase typically improves profit margin more than a 1% cost reduction. (2) Reduce COGS — negotiate with suppliers, reduce waste, improve production efficiency. (3) Increase volume — spreads fixed costs over more units, improving net margin. The most powerful lever is usually pricing, as it directly flows to the bottom line without requiring operational changes.