Profit Margin Calculator

Calculate gross profit margin, net profit margin and markup from revenue and costs.

Revenue ($)

Cost of goods sold ($)

Operating costs ($)

Gross profit

$40,000

Gross margin

40.0%

Net profit

$25,000

Net margin

25.0%

Markup

66.7%

Gross margin vs. net margin: what's the difference?

Gross profit margin measures how much money remains after paying the direct costs of producing your product or delivering your service (the Cost of Goods Sold, or COGS). It tells you how efficiently your core operations generate profit before overhead.

Net profit margingoes further — it deducts operating expenses (rent, salaries, marketing, utilities) from gross profit. This is what most people mean when they say “profit margin”, and it is the number that tells you how much of every dollar of revenue actually stays in the business.

Gross margin % = (Revenue − COGS) ÷ Revenue × 100
Net margin %   = (Revenue − COGS − Operating costs) ÷ Revenue × 100

Margin vs. markup: two different ratios

Margin and markup both measure profitability, but they use a different denominator — and confusing the two leads to systematic pricing errors.

	Formula	Example (cost $60, price $100)
Margin	(Price − Cost) ÷ Price × 100	($100 − $60) ÷ $100 = 40%
Markup	(Price − Cost) ÷ Cost × 100	($100 − $60) ÷ $60 = 66.7%

A 40% margin is not the same as a 40% markup. If you target a 40% margin and accidentally use the markup formula, you will underprice and earn less than expected. Retailers commonly work with markup; finance teams commonly use margin.

Profit margin benchmarks by industry

Industry	Gross margin	Net margin	Notes
SaaS / Software	70–90%	10–30%	Low COGS, high R&D and S&M spend
Professional services	50–70%	15–25%	Labour-heavy COGS
E-commerce / Retail	25–50%	2–10%	Thin net margins, high volume
Restaurants	60–70%	3–9%	High labour and rent costs
Manufacturing	20–40%	5–12%	Variable by product complexity
Healthcare / Pharma	40–80%	10–20%	Wide range by segment

These benchmarks vary significantly by company size, market position, and geography. Use them as orientation, not rigid targets.

How to improve your profit margin

Raise prices

If demand is inelastic, a price increase flows almost entirely to profit. A 5% price increase on €100K revenue with a 30% gross margin can increase gross profit by 17%.

Reduce COGS

Negotiate with suppliers, consolidate orders, improve production efficiency, or switch to equivalent materials at lower cost. Every €1 saved in COGS is €1 of gross profit.

Cut operating costs

Audit recurring expenses, renegotiate contracts, automate manual processes, and eliminate low-ROI spending. Avoid cutting things that generate revenue.

Increase volume

Fixed costs are spread across more units as volume grows, improving operating leverage. Doubling revenue without doubling fixed costs significantly improves net margin.

What counts as a good profit margin?

There is no single answer — it depends entirely on your industry, business model, and stage. A 5% net margin is strong for a grocery store and terrible for a software company. A 3% margin that is growing from -10% represents strong momentum, while a 20% margin that is contracting signals trouble.

Investors generally care most about gross margin (as a signal of the core business economics), the trajectory of net margin over time, and how margins compare to direct competitors. A high-growth company with thin margins may command a premium valuation if investors believe margins will expand at scale.

Formula / How it works

Gross Profit = Revenue − COGS Gross Margin % = (Gross Profit / Revenue) × 100 Net Profit = Gross Profit − Operating costs Markup % = (Gross Profit / COGS) × 100 Healthy gross margins: retail 30–50%, SaaS 70–90%, services 40–60%.