Business Calculator
Profit Margin Calculator
Estimate your gross profit margin, net profit margin, gross profit, and net profit based on your revenue and business costs.
Revenue and Costs
Enter your total sales revenue and the costs associated with generating that revenue.
What These Results Mean
Gross profit is revenue minus the direct cost of goods sold.
Gross profit margin shows the percentage of revenue remaining after direct costs are deducted.
Net profit subtracts both direct costs and operating expenses from revenue.
Net profit margin shows how much of each revenue dollar remains as profit after the included expenses.
Profit Margin Formula
Gross Profit = Revenue − Cost of Goods Sold
Gross Profit Margin = Gross Profit ÷ Revenue × 100
Net Profit = Revenue − Cost of Goods Sold − Operating Expenses
Net Profit Margin = Net Profit ÷ Revenue × 100
How to Use the Profit Margin Calculator
Start by entering your total business revenue for the period you want to analyze.
Next, enter your cost of goods sold. This should include the direct costs associated with producing or purchasing the products or services you sell.
Then enter operating expenses such as rent, payroll, insurance, software, marketing, utilities, and other overhead expenses.
The calculator will estimate gross profit, gross profit margin, net profit, and net profit margin. It will also show what percentage of revenue is being used for direct costs and operating expenses.
You can change the values to compare different pricing, cost, expense, and revenue scenarios.
Profit Margin Example
Suppose a business generates $25,000 in revenue, has $12,000 in cost of goods sold, and has $5,000 in operating expenses.
Gross profit would be $13,000, which produces a gross profit margin of 52%.
After subtracting the $5,000 in operating expenses, net profit would be $8,000. That produces a net profit margin of 32%.
In this example, 48% of revenue is being used for cost of goods sold and 20% is being used for operating expenses.
Frequently Asked Questions
What is profit margin?
Profit margin measures how much profit remains from revenue after certain business costs are deducted. It is usually expressed as a percentage of revenue.
What is gross profit margin?
Gross profit margin shows the percentage of revenue remaining after subtracting the direct cost of goods sold. It does not include operating expenses such as rent, payroll, insurance, and marketing.
What is net profit margin?
Net profit margin shows the percentage of revenue remaining after subtracting both cost of goods sold and the operating expenses included in the calculator.
What should I include in cost of goods sold?
Cost of goods sold generally includes direct costs tied to producing or purchasing what your business sells. Examples may include materials, wholesale inventory, manufacturing costs, and certain direct labor costs.
What is a good profit margin?
There is no single profit margin that is considered good for every business. Margins vary by industry, pricing strategy, business model, overhead, competition, and growth stage. It is usually more useful to compare your margin with your own historical performance and similar businesses in your industry.
Can a business have a positive gross margin but lose money?
Yes. A business can earn a positive gross profit but still have a net loss if operating expenses are greater than the gross profit generated.
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