Profit Margin Calculator
CheckedThis profit margin calculator gives gross margin, net margin and profit in dollars from revenue, cost of goods and operating costs. Free, no sign-up, and the result updates as you type.
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Sellers quote a gross margin and then budget as though it were the net one. Gross margin stops at the cost of the goods; net margin carries on through marketplace fees, advertising, software, shipping supplies and your own wage, and the distance between the two is usually most of the number. A store running 40% gross can easily net 14%. This calculator takes revenue, cost of goods and everything below that line, and returns both percentages plus the profit in dollars, so you can see which of the two you have actually been quoting.
How it's calculated
Gross margin = (revenue − COGS) ÷ revenue × 100 Net margin = (revenue − COGS − operating costs) ÷ revenue × 100
LaTeX source
\text{Gross} = \frac{R - C}{R} \times 100 \qquad \text{Net} = \frac{R - C - O}{R} \times 100 Worked examples
A store doing $12,000 a month
14.2% net margin
The $7,200 of goods leaves $4,800 gross profit, a 40% gross margin, which sounds comfortable. Then $3,100 of fees, ads and software comes out and $1,700 is left — a 14.2% net margin. The 26 points between the two figures are what the business costs to run, and they are what people forget when they price to a gross target.
The numbers used
- Revenue
- 12000
- Cost of goods sold
- 7200
- Operating costs
- 3100
A smaller month where operating costs did not shrink
3.8% net margin
Gross margin is 45% here, better than the busier month, and the business still only kept $180. Operating costs are mostly fixed: the software bill and the ad budget did not halve when sales did. Gross margin measures the product; net margin measures the month, and only one of them pays you.
The numbers used
- Revenue
- 4800
- Cost of goods sold
- 2640
- Operating costs
- 1980
Questions sellers ask
How do you calculate profit margin?
Divide profit by revenue and multiply by 100. The only decision is which profit: revenue minus cost of goods gives gross margin, and revenue minus every cost gives net margin. On $12,000 of sales with $7,200 of goods and $3,100 of running costs, that is 40% gross and 14.2% net. Say which one you mean whenever you quote a margin, because the two can differ by more than twenty points.
How do I calculate a 70% profit margin?
To get a 70% profit margin, divide the cost by 0.30: an item that costs $30 has to sell for $100, leaving $70 of profit, which is 70% of the price. The general rule is price = cost ÷ (1 − margin). That price is a 233.3% markup on cost, so adding 70% to the cost gives only a 41.2% margin (70 ÷ 170). If the 70% is meant as a net margin, the cost has to include fees, ads and running costs, not just the goods.
How do I calculate a profit margin percentage?
Profit divided by revenue, times 100 — and note that it is revenue on the bottom, not cost. Dividing by cost gives markup, a different and always larger number. A $30 item that cost $20 has a 33.3% margin and a 50% markup. Anyone who prices from cost and reports on margin needs both figures in front of them.
Is a 40% profit margin high?
As a gross margin, 40% leaves room to work with; as a net margin it is exceptional. Fees, advertising and running costs usually take most of the gross margin — in the first example above, 40% gross became 14.2% net — so a genuine 40% net usually means a digital product, a service, or costs that have not all been counted yet. Check whether your own wage and your ad spend are in the figure before celebrating.
Is 20% a good net profit margin?
For a product business, 20% net is strong. In Aswath Damodaran's January 2026 margin data for US-listed companies at NYU Stern, net margin is 5.6% for general retailers and 1.3% for grocery and food retailers. The risk with a healthy net margin is complacency about where it came from: if it rests on one supplier price or one cheap ad channel, it is a number you are renting, not one you own.
What is a good profit margin for sales?
Judge it against what the margin has to cover rather than against an industry average. A 25% gross margin is fine on high-volume goods that sit in a warehouse for a week and terrible on slow stock you hold for six months. Work out your monthly fixed costs, divide by your gross margin percentage, and you have the revenue you need to break even — that number is more useful than any benchmark.
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