Profit Margin Calculator: Calculate Gross & Net Margin
Profit margin calculator online: calculate gross and net margin, markup, and profit from cost and revenue inputs. See margin and markup side by side.
Updated 2026-08-16
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Features
- Calculate gross profit margin (revenue - cost of goods sold)
- Calculate net profit margin (revenue - all expenses)
- Calculate markup percentage (profit / cost)
- Understand the difference between margin and markup
- Instant calculation as you type
- For pricing strategy and business planning
- Works for any currency or unit
- Helps set competitive yet profitable prices
- For e-commerce and retail businesses
How to Use
- 1For gross margin: Enter revenue (selling price) and cost (cost of goods).
- 2View instant results: profit amount, margin %, and markup %.
- 3For net margin: Enter revenue and total costs (including operating expenses).
- 4Change the revenue or cost inputs to try different pricing scenarios; results update instantly.
- 5Use markup to set prices from cost (price = cost × (1 + markup%)).
- 6Toggle between gross and net margin to understand different profit layers.
- 7To hit a target margin, compute the price with Price = Cost ÷ (1 − Target Margin) and enter it as revenue.
- 8Add operating expenses to calculate true net margin for your business.
Frequently Asked Questions
What's the difference between margin and markup?
Margin is profit as a percentage of revenue (profit ÷ revenue); markup is profit as a percentage of cost (profit ÷ cost). With $60 cost and $100 price, margin is 40% but markup is 66.67%. A common trap: a 50% markup is NOT a 50% margin; with $60 cost and $90 price, markup is 50% while margin is only 33.3%. Use margin to analyze profitability and compare with industry benchmarks; use markup to set prices from cost. This calculator shows both numbers side by side so you never confuse them.
What is a good profit margin?
It varies by industry. Retail: 2-5% (net), 20-50% (gross). Software/SaaS: 15-25% (net), 70-90% (gross). Consulting: 15-30% (net). Restaurants: 3-5% (net). Research your industry benchmarks. Higher isn't always better; consider competitive positioning and growth strategy.
How do I set a price to achieve a target margin?
Use the profit margin calculator formula: Price = Cost ÷ (1 − Target Margin). For example, cost $60, target margin 40%: Price = $60 ÷ (1 − 0.40) = $100. This ensures you achieve exactly 40% margin on the sale.
What's included in gross margin vs net margin?
Gross margin = (Revenue - COGS) / Revenue, where COGS is direct costs (materials, labor). Net margin = (Revenue - All Expenses) / Revenue, including operating expenses, taxes, interest. Gross margin shows product profitability; net margin shows overall business profitability.
Why is my margin negative?
A negative margin means you're selling at a loss; cost exceeds revenue. This may be intentional for market penetration, clearing inventory, or as a loss leader strategy. However, sustained negative margins are unsustainable. Review your pricing and cost structure.
How do I calculate profit margin in Excel?
Put revenue in one cell and cost in another, then use =(A1-B1)/A1 (where A1 is revenue, B1 is cost) and format the cell as Percentage; that's your gross margin. For markup use =(A1-B1)/B1. To model net margin, replace cost with total expenses. Excel is convenient when your price lists change often; this calculator is faster for one-off scenario checks and shows margin and markup side by side.
Why does my margin look wrong when tax (VAT/GST) is included in the price?
Sales tax is not profit. If you compare revenue including VAT (e.g., 20% in the UK, 15% in South Africa) against cost, the margin is overstated. Work with pre-tax revenue: if a product sells for $120 including 20% VAT, the pre-tax price is $100, and with $60 cost the real margin is 40%, not 50%. Subtract the tax before entering revenue here, or use a tax-exclusive price list.
How do I calculate break-even price?
Break-even price equals total cost; at that price your profit is $0 (margin = 0%), so enter revenue equal to cost here and the margin reads 0%. Any price above cost generates positive margin. To reach a target margin instead, use the formula: price = cost ÷ (1 − target margin). For example, $60 cost at a 40% target margin gives $60 ÷ 0.6 = $100; enter $100 as revenue to confirm the calculator shows 40%.
How does volume discount affect margin?
Volume discounts reduce your selling price per unit but can increase total profit through higher sales volume. For example, offering 10% off might reduce per-unit margin from 40% to 33%, but if sales double, total profit increases. Use this calculator to model different volume and pricing scenarios.
What is the difference between operating margin and net margin?
Operating margin = (Revenue - COGS - Operating Expenses) / Revenue, showing profitability from core operations before interest and taxes. Net margin = (Revenue - All Expenses) / Revenue, including interest, taxes, and one-time items. Operating margin shows operational efficiency; net margin shows overall financial health.
How do I calculate margin for a service-based business?
For service businesses, COGS includes labor costs, contractor fees, and direct service delivery costs. For example, if you charge $200/hour and pay your contractor $120/hour, gross margin = ($200 - $120) / $200 = 40%. Include software subscriptions, office costs, and marketing as operating expenses for net margin calculation.
What is contribution margin and how is it different?
Contribution margin = Revenue - Variable Costs, showing how much each sale contributes to fixed costs and profit. Unlike gross margin, contribution margin separates fixed costs (rent, salaries) from variable costs (materials, shipping). Use contribution margin for decisions about product lines, pricing, and sales commissions.
Why can markup exceed 100% but margin cannot?
It is a mathematical consequence of the definitions. Margin = profit ÷ revenue, and since revenue always includes the profit, margin can approach but never reach 100%. Markup = profit ÷ cost, and cost can be very small relative to the price; selling a $10 item for $100 is a 900% markup but only a 90% margin. This is normal, not an error: a 100%+ markup simply means the price is more than double the cost.
Why am I still losing money at what looks like a good margin?
The usual cause is costs missing from the calculation: payment gateway fees (typically 2-4% per transaction), refunds and chargebacks, advertising spend, platform commissions, and returns handling. A product with a 40% gross margin can end up at 10% or less after those costs. Model the numbers here with all real costs, and if the result is still thin, either raise the price or cut a specific cost; the calculator shows exactly where the margin goes.
Why does my profit margin calculator result differ from my accounting software?
Usually because of what counts as cost. Accounting software often includes shipping, platform fees, and taxes in COGS, while this calculator only subtracts what you enter. If one side uses pre-tax revenue and the other doesn't, the percentage shifts by several points. Enter the same pre-tax revenue and the same cost line items in both places; the formula (revenue − cost) ÷ revenue is identical, so the numbers will match.
How do I calculate profit margin without a calculator?
By hand: subtract cost from revenue, divide the result by revenue, then multiply by 100. For example, revenue $80 and cost $50: 80 − 50 = 30; 30 ÷ 80 = 0.375; 0.375 × 100 = 37.5% margin. The same three steps work with any currency; just keep revenue and cost in the same units, and use pre-tax figures for consistency.
Why does my profit margin look higher in the calculator than in my bank account?
Because profit and cash are not the same thing. The calculator works out the accounting margin from the revenue and costs you enter, but your bank balance also depends on timing: unpaid invoices, prepaid inventory, and tax payments. A high margin on paper does not mean the money is in the bank yet; use the margin for pricing decisions and a cash-flow plan to manage timing.