Business Finance
Profit Margin Calculator
Calculate gross, operating, or net profit margin as a percentage of revenue — switch between margin types and see your profit figure instantly.
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How the calculation works
Gross Margin = (Revenue − COGS) ÷ Revenue × 100
Operating Margin = (Revenue − COGS − Operating Expenses) ÷ Revenue × 100
Net Margin = (Revenue − COGS − Operating Expenses − Taxes & Interest) ÷ Revenue × 100
Example: Revenue $100,000 · COGS $60,000 · Operating Expenses $15,000 · Taxes $5,000
Gross Margin = ($100k − $60k) ÷ $100k = 40% · Operating Margin = $25k ÷ $100k = 25% · Net Margin = $20k ÷ $100k = 20%
Frequently Asked Questions
- It varies by industry. Retail typically runs 2–5% net margin; SaaS companies often exceed 20%. Gross margins above 50% are common in software. Compare against industry benchmarks rather than a universal target.
- Gross margin only deducts the direct cost of goods sold (COGS). Net margin deducts everything — COGS, operating expenses, interest, and taxes. Net margin shows what you truly keep from each dollar of revenue.
- Yes. If operating expenses, debt interest, or taxes exceed the gross profit, net margin turns negative even though the product itself is profitable to produce. This is common in early-stage companies with high overhead.
- COGS (Cost of Goods Sold) includes direct costs: raw materials, direct labour, manufacturing overhead, and freight-in. It excludes indirect costs like marketing, admin salaries, and rent — those go in operating expenses.
- Three levers: increase prices (most impactful), reduce COGS through better supplier deals or process efficiency, or cut operating expenses. Gross margin improvement is often faster than cutting overheads.
- No. Margin is profit ÷ selling price. Markup is profit ÷ cost. A 50% markup on a $10 cost gives a $15 price, but the margin is only 33%. Always clarify which measure you're using when comparing figures.