Profit Margin Calculator
Calculate gross, operating, and net profit margins for your business. See how much profit you keep from every dollar of revenue.
$100,000 of revenue against $72,000 of costs is a 28% gross margin and a 38.9% markup — the same $28,000 of profit described two different ways.
Calculator
Enter your values below. Results update instantly.
How This Calculator Works
Profit margins show what percentage of revenue you keep as profit:
Gross Margin = (Revenue - COGS) / Revenue
Net Margin = Net Income / Revenue
Worked example
Using the defaults — revenue $100,000 and costs $72,000:
Gross margin = Gross profit ÷ Revenue
Find the gross profit. $100,000 − $72,000 = $28,000.
Express it as a margin. $28,000 ÷ $100,000 = 28%. Twenty-eight cents of every revenue dollar survives after direct costs.
Convert to markup. Markup is measured against cost, not revenue: $28,000 ÷ $72,000 = 38.9%. The same profit is a 28% margin and a 38.9% markup. Confusing the two is one of the most common pricing errors.
Test a price change. Raising the price 5% to $105,000 with costs unchanged lifts gross profit to $33,000 and the margin to 31.4% — a 17.9% increase in gross profit from a 5% price move. That leverage is why pricing decisions deserve more attention than cost reductions.
Enter 100000 and 72000 above to reproduce the 28% margin. The margin and markup figures are not interchangeable; always state which one you mean.
Margin versus markup, and what a price change does
The same gross profit expressed both ways, then the effect of three pricing moves on a $100,000 revenue base with $72,000 of costs.
| Scenario | Revenue | Gross profit | Margin | Markup |
|---|---|---|---|---|
| Baseline | $100,000 | $28,000 | 28.0% | 38.9% |
| Price +5% | $105,000 | $33,000 | 31.4% | 45.8% |
| Price −5% | $95,000 | $23,000 | 24.2% | 31.9% |
| Price +10% | $110,000 | $38,000 | 34.5% | 52.8% |
| Cost +5% | $100,000 | $24,400 | 24.4% | 33.9% |
A 5% price rise adds 17.9% to gross profit; a 5% cost rise removes 12.9%. Price changes move the bottom line roughly 1.4× as much as equivalent cost changes at this cost structure.
Common mistakes with this calculation
- Quoting a markup as a margin. A 50% markup on a $100 cost gives a $150 price, which is a 33.3% margin, not 50%. Markup is cost-relative, margin is revenue-relative, and the two diverge more as the margin rises.
- Mixing gross margin with net margin. Gross margin excludes only cost of goods sold. Net margin also deducts operating expenses, interest, and tax. A business with a 28% gross margin and a 3% net margin is normal; presenting the gross figure as profitability is not.
- Treating high-margin products as automatically best. A 90% margin on a hundred units is worth less than a 25% margin on a hundred thousand. Margin percentage without volume, and without the cash tied up in inventory, says very little about which product to push.
- Ignoring the cost of revenue growth. Growing revenue by discounting raises the top line and lowers the margin at the same time. If variable costs scale with volume, a discount-funded growth strategy can reduce total profit while every headline revenue metric improves.
When this calculator does not apply
- The calculator takes a single revenue and cost figure. Real businesses have product lines with very different margins that need to be analysed separately.
- It treats costs as a single pool. Splitting variable from fixed costs is necessary to model what happens as volume changes.
- It does not account for volume effects: a price rise that loses customers can reduce total profit even as the margin percentage rises.
- Gross margin excludes operating expenses, interest and tax, so it is not a measure of actual profitability.
- It assumes costs are accurately allocated. Misallocated overhead is the most common reason a calculator and an accountant disagree.
Frequently Asked Questions
What is a good profit margin?
It depends on industry. Retail averages 2-5%, software 15-25%, services 10-20%. Compare to your industry benchmark rather than a universal standard.
How can I improve my profit margin?
Increase prices, reduce COGS, cut operating expenses, or improve operational efficiency. Each has trade-offs.
Sources & Methodology
This calculator uses standard financial formulas. See our methodology page for the full formula derivation.
- Business and Profit Margin Basics US Small Business Administration
- Financial Statements and Margin Analysis US Securities and Exchange Commission
- Small Business Financial Management US Small Business Administration
- Gross Domestic Product by Industry US Bureau of Economic Analysis
- Small Business Facts SBA Office of Advocacy
Last reviewed .
Key takeaways
- $100,000 revenue against $72,000 cost is a 28% margin and a 38.9% markup — the same profit described two ways.
- A 5% price rise on this cost structure adds 17.9% to gross profit; a 5% cost rise removes 12.9%.
- Never quote a markup as a margin. State which measure you are using.
- Gross margin is not profitability. Net margin subtracts everything else.
- Margin percentage without volume says little about where the profit actually is.