Gross Margin Calculator

Subtract cost of goods sold from revenue, divide by revenue, multiply by 100. On $18,500 of sales with $11,100 of goods, that is $7,400 ÷ $18,500 = 40%. The denominator is revenue, never cost — dividing by cost gives markup instead, which is always the larger number. Gross margin and the COGS share of revenue always add up to 100, which is the quickest way to check you have not miscalculated.

(Revenue − COGS) ÷ Revenue × 100. The formula is trivial; deciding what counts as COGS is not. Include the product cost, inbound freight, import duty and primary packaging, because those scale with units sold. Exclude marketplace fees, payment processing, advertising, software and salaries — those are operating costs, and folding them in gives you a net margin with a gross margin's name.

A 40% gross margin means 40 cents of every sales dollar is left after the goods are paid for. On a $50 product, the unit costs you $30 and contributes $20. It is a common target in retail because it survives a typical 13% to 15% marketplace fee and still leaves something, but on a slow-moving product that sits in storage for months it may not.

It depends entirely on what has to come out afterwards. A 30% gross margin is healthy for a grocery or hardware business with fast turns and cheap fulfilment, and thin for anyone selling on a marketplace that takes 13.6%, because that fee alone is nearly half the margin. Work out your fee load and ad cost per order first, then judge the 30%.

It means the goods cost you 80 cents of every dollar you take. On a $40 sale, $32 is product cost and $8 is gross profit. At that level almost nothing can go wrong: one return, one discount code, or one marketplace fee wipes the unit out. Twenty per cent gross works only at volume with low fixed costs, which is why it is a wholesale and distribution number rather than a retail one.

GP% is gross profit percentage, the same figure as gross margin: gross profit divided by revenue, times 100. Retail and hospitality teams tend to say GP%, accountants say gross margin, and both mean the money left after cost of sales. Watch for suppliers quoting GP% on the ex-VAT price while you are reading it against the till price — that mismatch is worth several points.