Profit Margin Calculator
Profit margin is profit divided by revenue. $500 of sales that cost $320 to supply leaves a gross profit of $180, a 36% gross margin.
Updated
Calculate Gross Profit Margin and Net Profit Margin for your business
Formulas Used:
Gross Profit = Revenue - COGS
Gross Profit Margin = (Gross Profit ÷ Revenue) × 100%
Net Profit = Revenue - COGS - Operating Expenses
Net Profit Margin = (Net Profit ÷ Revenue) × 100%
Worked example
Revenue: $50,000. COGS: $32,000. Operating expenses: $9,000.
- Gross profit = $50,000 − $32,000 = $18,000
- Gross profit margin = $18,000 / $50,000 × 100 = 36%
- Net profit = $50,000 − $32,000 − $9,000 = $9,000
- Net profit margin = $9,000 / $50,000 × 100 = 18%
The gap between the two margins — 36% gross versus 18% net — is entirely the operating expenses. Gross margin tells you how efficiently the product itself is priced relative to what it costs to make; net margin tells you what's actually left after running the business around it.
Why operating expenses are optional
Leaving the Operating Expenses field blank isn't treated as "zero costs" — it's treated as "gross margin only," and the Net Profit Analysis section doesn't render at all. This matters for businesses that don't cleanly separate COGS from overhead, or for a quick gross-margin gut check where operating costs aren't relevant yet.
Reading the interpretation band
The tool labels gross margins under 20% as "low," 20–50% as "moderate," and above 50% as "high," but these thresholds are generic — a 36% gross margin is unremarkable for a retailer but would be exceptional for a grocery chain, so compare your result against your own industry rather than treating the label as an absolute verdict.