Profit Margin Calculator

Q: What is the difference between markup and margin?

Markup is profit as a percentage of cost. Margin is profit as a percentage of selling price. If you buy something for $60 and sell it for $100, markup is 66.7% ($40/$60) and margin is 40% ($40/$100). A 50% markup equals only a 33.3% margin.

Q: What is the difference between gross, operating, and net margin?

Gross margin = (Revenue - COGS) / Revenue, measuring production efficiency. Operating margin subtracts operating expenses (rent, salaries, marketing). Net margin subtracts taxes — it's your bottom-line percentage.

Q: How do I improve my profit margin?

Three levers: (1) Raise prices — even a 5% increase goes straight to gross profit. (2) Reduce COGS — negotiate supplier terms, reduce waste, improve efficiency. (3) Cut operating expenses — automate tasks, renegotiate leases, reduce unnecessary SG&A.

Calculate gross, operating, and net profit margin. Convert between markup and margin. Compare your margins to industry benchmarks across 8 sectors.

Calculate gross, operating, and net profit margin from revenue and costs

Revenue

Total sales or revenue

Cost of goods sold (COGS)

Direct costs: materials, labor, shipping

Operating expenses

Rent, salaries, marketing, utilities

Tax rate

Federal corporate: 21%. Pass-through varies.

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How to Use This Calculator

Calculate Margin tab

The default tab. Enter your revenue and cost of goods sold (COGS). The calculator shows gross profit, gross margin %, operating profit, operating margin %, and net profit after tax. Expand "More options" to add operating expenses and adjust the tax rate. The health check rates your margin as Excellent, Good, Average, or Low.

Markup vs Margin tab

Enter your cost per unit and desired margin or markup percentage, then toggle the mode. The calculator shows the required selling price, the equivalent markup or margin, profit per unit, and total profit on your quantity. The "Common confusion" section shows why 30% markup is not 30% margin.

Industry Comparison tab

Enter your revenue, COGS, and select your industry. The calculator compares your gross and operating margins against industry benchmarks, shows a gap analysis (above/below average), and displays top quartile, median, and bottom quartile benchmarks for your sector.

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The Formulas

Three margin formulas measure profitability at different levels:

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

Operating Margin = (Revenue − COGS − Operating Expenses) ÷ Revenue × 100

Net Margin = (Operating Profit − Taxes) ÷ Revenue × 100

Markup and margin are related but different:

Markup = (Price − Cost) ÷ Cost × 100

Margin = (Price − Cost) ÷ Price × 100

Price from target margin = Cost ÷ (1 − Margin/100)
Price from target markup = Cost × (1 + Markup/100)

The key insight: margin is always lower than markup for the same dollar profit. A 50% markup yields only a 33.3% margin. A 30% margin requires a 42.9% markup. Confusing the two is one of the most common pricing mistakes in business.

Example

Elena — E-commerce Store Owner, 31, Austin TX

Elena runs an online accessories store. Revenue $200K, COGS $90K, operating expenses $70K. She wants to understand her margins and compare to the industry.

Calculate Margin tab

Gross profit$110,000

Gross margin55%

Operating profit$40,000

Operating margin20%

Net profit (21% tax)$31,600

Net margin15.8%

Elena keeps 15.8 cents of every dollar in revenue after all costs and taxes.

Markup vs Margin tab

Elena’s average product costs $18. She wants a 55% gross margin. The calculator shows she needs to price at $40 (122% markup). If she had set a 55% markup instead, her price would be only $27.90 — and her actual margin would be just 35.5%.

Industry Comparison tab

E-commerce average gross margin: 40–60%. Elena’s 55% is right in the upper half. Her operating margin (20%) also exceeds the industry median, putting her in the top quartile.

Industry Profit Margin Benchmarks

Approximate ranges for small-to-mid-size businesses (2024–2025 data).

Industry	Gross Margin	Net Margin
Restaurant	60–65%	3–5%
Retail (general)	25–35%	2–5%
SaaS	70–85%	20–40%
Construction	20–30%	5–10%
E-commerce	40–60%	5–10%
Professional services	50–70%	15–25%
Manufacturing	25–40%	5–10%
Healthcare	40–60%	5–15%

Sources: NYU Stern Damodaran industry margins, IBISWorld, SBA industry profiles. Actual margins vary by company size, geography, and business model.

Frequently Asked Questions

What is a good profit margin for a small business?▼

It depends on your industry. A 5% net margin is typical for restaurants and retail. SaaS companies often achieve 20–40% net margins. Professional services average 15–25%. As a general rule: below 5% net margin is thin, 5–10% is average, 10–20% is good, and above 20% is excellent.

What is the difference between markup and margin?▼

Markup is profit as a percentage of cost. Margin is profit as a percentage of selling price. If you buy something for $60 and sell it for $100, markup is 66.7% ($40/$60) and margin is 40% ($40/$100). Margin is always a smaller number than markup for the same profit. A 50% markup equals a 33.3% margin.

What is the difference between gross, operating, and net margin?▼

Gross margin = (Revenue − COGS) / Revenue. It measures how efficiently you produce or source goods. Operating margin subtracts operating expenses (rent, salaries, marketing) from gross profit. It shows core business profitability. Net margin subtracts taxes from operating profit. It’s your bottom-line percentage — what you actually keep.

How do I improve my profit margin?▼

Three levers: (1) Raise prices — even a 5% increase goes straight to gross profit. (2) Reduce COGS — negotiate supplier terms, reduce waste, improve efficiency. (3) Cut operating expenses — automate tasks, renegotiate leases, reduce unnecessary SG&A. Focus on gross margin first since it multiplies across all units sold.

Why is my gross margin high but net margin low?▼

This means your operating expenses are eating most of your gross profit. Common causes: high rent, too many employees for your revenue level, excessive marketing spend, or high administrative costs. Compare your operating expense ratio (OpEx/Revenue) to industry benchmarks. If your gross margin is healthy (e.g., 60%) but net margin is low (e.g., 3%), your overhead is the problem, not your pricing.

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