Profit Margin Calculator
Calculate gross and net profit margins from revenue and costs.
Results
Profit margin reveals how efficiently a business converts revenue into profit. Gross margin shows profitability after direct costs (materials, manufacturing). Net margin shows what is left after all operating expenses (rent, salaries, marketing). Both are expressed as percentages of revenue for easy comparison across businesses of different sizes.
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Frequently asked questions
It varies by industry. Software companies often have 70-80% gross margins. Retail averages 25-50%. Restaurants typically run 3-9% net margins. Compare to industry benchmarks rather than absolute numbers.
Gross margin = (Revenue - COGS) / Revenue. It shows production efficiency. Net margin = (Revenue - COGS - Operating Expenses) / Revenue. It shows overall profitability after all costs.
Cost of Goods Sold includes direct costs to produce your product or service: raw materials, manufacturing labor, shipping to customers, packaging. It does not include rent, salaries for non-production staff or marketing.
Net margin subtracts operating expenses (rent, salaries, marketing, utilities, insurance) on top of COGS. A company can have a healthy 60% gross margin but only 10% net margin after overhead.
Increase gross margin by negotiating supplier costs, raising prices or improving production efficiency. Improve net margin by controlling overhead: reduce unnecessary expenses, automate processes or increase revenue without proportional cost increases.