What is the difference between gross margin and net margin?

Gross margin = (Revenue - COGS) / Revenue. It shows production efficiency. Net margin = (Revenue - All Costs) / Revenue. It shows overall profitability after operating expenses. Gross margin is always higher than net margin.

What is the difference between margin and markup?

Same profit dollars, different calculation. Margin = profit / revenue (e.g., $40 profit on $100 sale = 40% margin). Markup = profit / cost (e.g., $40 profit on $60 cost = 66.7% markup). Margin is always lower than markup for the same transaction.

How can I improve my profit margins?

To improve gross margin: increase prices, reduce COGS (negotiate with suppliers, bulk buying), or add higher-margin products. To improve net margin: cut operating costs (renegotiate contracts, automate), improve gross margin, or achieve economies of scale.

Verticals

Business

Profit Margin Calculator

Calculate gross margin, net margin, and markup for your business. See profit percentages and pricing recommendations.

Inputs

Total Revenueⓘ

Enter your total sales before any costs

Cost of Goods Sold (COGS)ⓘ

Only direct production costs, not overhead

Operating Expensesⓘ

All business expenses except COGS

Industry (Optional)ⓘ

Optional - helps contextualize your margins

Enter values to see results

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What is this?

A profit margin calculator helps you understand your business profitability. Gross margin shows how efficiently you produce goods/services (revenue minus COGS). Net margin shows overall profitability after all expenses. Both are expressed as percentages of revenue.

How to use

Enter your total revenue, cost of goods sold (COGS - direct production costs only), and operating expenses (rent, salaries, marketing, etc.). Optionally select your industry to compare against benchmarks. The calculator shows gross and net margins, markup, and break-even analysis.

Tips

**Gross vs Net Margin**: Gross = (Revenue - COGS) / Revenue. Net = (Revenue - COGS - Operating Expenses) / Revenue. Gross is about production efficiency, net is total business health.
**Margin vs Markup**: Same dollar amount, different calculation. Margin = profit / revenue. Markup = profit / cost. A $100 item with $60 cost: 40% margin, 66.7% markup.
**Healthy Margins by Industry**: SaaS (70-90% gross, 10-30% net), Retail (25-50% gross, 2-10% net), Restaurants (60-70% gross, 3-10% net), Consulting (60-80% gross, 15-30% net).
**Improve Gross Margin**: Increase prices (easiest), reduce COGS (negotiate with suppliers, bulk buying), improve production efficiency, or add higher-margin products to your mix.
**Improve Net Margin**: Cut operating costs (renegotiate rent, reduce software subscriptions, automate tasks), increase gross margin, or achieve economies of scale as you grow.
**Break-Even Analysis**: Know your break-even revenue (COGS + Operating Expenses). Anything above that is profit. Track distance above break-even as safety margin.
**Pricing Strategy**: Cost-plus pricing (Cost + desired markup) works for commodities. Value-based pricing (what customers will pay) is better for differentiated products.
**Warning Signs**: Gross margin < 20% (hard to cover overhead), net margin < 5% (vulnerable to any disruption), negative net profit (losing money - urgently address).

Disclaimer: See our full disclaimer for details.

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Tips

**Gross vs Net Margin**: Gross = (Revenue - COGS) / Revenue. Net = (Revenue - COGS - Operating Expenses) / Revenue. Gross is about production efficiency, net is total business health.

**Margin vs Markup**: Same dollar amount, different calculation. Margin = profit / revenue. Markup = profit / cost. A $100 item with $60 cost: 40% margin, 66.7% markup.

**Healthy Margins by Industry**: SaaS (70-90% gross, 10-30% net), Retail (25-50% gross, 2-10% net), Restaurants (60-70% gross, 3-10% net), Consulting (60-80% gross, 15-30% net).

**Improve Gross Margin**: Increase prices (easiest), reduce COGS (negotiate with suppliers, bulk buying), improve production efficiency, or add higher-margin products to your mix.

**Improve Net Margin**: Cut operating costs (renegotiate rent, reduce software subscriptions, automate tasks), increase gross margin, or achieve economies of scale as you grow.

**Break-Even Analysis**: Know your break-even revenue (COGS + Operating Expenses). Anything above that is profit. Track distance above break-even as safety margin.

**Pricing Strategy**: Cost-plus pricing (Cost + desired markup) works for commodities. Value-based pricing (what customers will pay) is better for differentiated products.

**Warning Signs**: Gross margin < 20% (hard to cover overhead), net margin < 5% (vulnerable to any disruption), negative net profit (losing money - urgently address).