Free Accounting Tool

Profit Margin Calculator

Calculate gross, operating, and net profit margins (and markup) from your revenue, COGS, and expenses. All three margins update live.

$

Total sales for the period

$

Direct cost of producing what was sold

$

Salaries, rent, marketing, software, etc.

$

Margin breakdown

Net profit margin

20.00%

Gross profit
$4,000.00
Gross margin
40.00%
Operating profit
$2,500.00
Operating margin
25.00%
Net profit
$2,000.00
Markup on COGS
66.67%

Frequently asked questions

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

Gross margin is revenue minus cost of goods sold, divided by revenue. Operating margin subtracts operating expenses (rent, salaries, marketing). Net margin subtracts everything, including interest, taxes, and depreciation. They each tell you something different about how the business runs.

How do I calculate profit margin?

Profit margin = (revenue − costs) ÷ revenue, expressed as a percentage. The "costs" you subtract depends on which margin you mean: COGS for gross margin, COGS plus operating expenses for operating margin, all expenses for net margin.

What is a good profit margin?

It depends heavily on the industry. Software businesses regularly run 70-90% gross margins and 20-30% net margins. Retail and grocery often live on 1-5% net margins. Compare against direct competitors and industry benchmarks rather than against an absolute number.

Is markup the same as margin?

No. Margin is profit as a percentage of revenue. Markup is profit as a percentage of cost. A 50% markup is only a 33% margin. Confusing these is one of the most common pricing mistakes; if you want a 40% gross margin, set price = cost ÷ (1 − 0.40), not cost × 1.40.

Why is my net margin negative?

Your total expenses (COGS + operating + other) exceeded revenue for the period. That can be normal for a growing business in early stages, or it can be a sign of pricing or cost problems. Look at gross margin first; if gross margin is positive but net is negative, the issue is fixed costs or overhead, not pricing.

Should I use this for monthly, quarterly, or annual numbers?

Any consistent period works. For internal management decisions, monthly is most useful. For comparison to public companies and benchmarks, use trailing 12 months or annual. Just keep all four input fields on the same time period.

Sources