Free Online Profit Margin Calculator
Calculate gross margin, net margin, markup, and profit.
Profit breakdown
| Line item | Amount | % of revenue |
|---|
Margin is not markup. Margin compares profit with the selling price, while markup compares profit with the cost. A product that costs 60 and sells for 100 has a 40% margin but a 66.67% markup. Use the margin figures when judging profitability and the markup figure when setting prices from cost.
About the Profit Margin Calculator
Profit margin answers a simple but important question: of every dollar that comes in as revenue, how much is left as profit? Business owners often look at revenue growth and assume the company is doing well, but revenue without a healthy margin can still leave a business short of cash. This calculator separates the two main stages of profitability so you can see where money is being consumed. Gross profit looks only at the direct cost of producing or buying the goods that were sold. Net profit also subtracts the operating expenses required to keep the business running, such as rent, salaries, software, utilities, and marketing.
What the calculator shows
Enter revenue, cost of goods sold, and operating expenses, then choose the currency that matches your books. The results panel reports gross profit, net profit, gross margin percentage, net margin percentage, markup percentage, and the expense ratio. The breakdown table repeats the same numbers as a simple income statement, with every line expressed as a percentage of revenue. That makes it easy to compare a small business with an industry benchmark or to see how a price change would affect profitability. Negative values are highlighted so a loss is immediately visible.
Margin versus markup
Margin and markup both describe profit, but they use different denominators. Margin divides profit by revenue. Markup divides profit by cost. Because revenue is always larger than cost in a profitable sale, the markup percentage is always higher than the margin percentage. If you buy an item for 80 and sell it for 100, the profit is 20, the margin is 20%, and the markup is 25%. Converting between the two is straightforward: margin equals markup divided by one plus markup, and markup equals margin divided by one minus margin. Mixing the two up when pricing can quietly erode profit, especially on high-volume products with thin margins.
Using the results
The expense ratio shows how much of each revenue dollar is absorbed by operating costs. A rising expense ratio with a stable gross margin usually means overhead is growing faster than sales. A falling gross margin with stable expenses usually points to higher product costs, discounting, or a change in sales mix. The calculator does not include taxes, interest, depreciation, or one-off items, so its net profit is an operating measure rather than a complete accounting profit. For formal reporting, always reconcile the figures with your accountant and your bookkeeping system.
Frequently asked questions
What is a good profit margin?
It depends heavily on the industry. Grocery retailers often operate on low single-digit net margins, while software and professional services can reach 20% or more. Compare against your own sector rather than a universal target.
Why is my net margin lower than my gross margin?
Because operating expenses are deducted after gross profit. Rent, payroll, marketing, and other overhead reduce the amount that remains as net profit.
Does this calculator include tax and interest?
No. It measures operating profitability from revenue, COGS, and operating expenses. Tax, interest, depreciation, and exceptional items are outside its scope.