Profit Margin Calculator
Margin % = ((revenue − cost) ÷ revenue) × 100
How Profit Margin Works
Profit margin expresses how much of each revenue dollar remains as profit after subtracting direct costs. Gross profit margin specifically measures profit relative to revenue before operating expenses, taxes, and interest. The formula is: gross profit = revenue − cost, and gross margin = (gross profit ÷ revenue) × 100.
Consider a product with $500 in revenue and $350 in cost. The gross profit is $500 − $350 = $150, and the margin is ($150 ÷ $500) × 100 = 30%. This means 30 cents of every sales dollar covers the cost of goods, and 30 cents is gross profit — before rent, salaries, marketing, and other overhead are deducted.
Margin and markup are related but not interchangeable. A 30% margin corresponds to a 42.9% markup on cost (because $150 profit on $350 cost = 42.9%). Businesses often set prices using markup but evaluate performance using margin. Net profit margin goes further by subtracting all expenses, giving a clearer picture of overall business health.
Healthy margins vary dramatically by industry. Software companies may achieve 70–80% gross margins, while grocery stores operate on 25–30%. Restaurants typically run 60–70% gross margins on food but much lower net margins after labor and rent. Comparing your margins to industry benchmarks helps identify pricing problems or cost inefficiencies early.
Use this calculator to quickly evaluate product profitability, compare pricing scenarios, or verify that a proposed price achieves your target margin. Enter revenue and cost to see the gross profit amount and margin percentage — essential data for any pricing or business planning decision.
Examples
| Example | Result |
|---|---|
| Revenue $500, cost $350 | Profit $150, margin 30% |
| Revenue $1,000, cost $600 | Profit $400, margin 40% |
| Revenue $250, cost $200 | Profit $50, margin 20% |
| Revenue $800, cost $720 | Profit $80, margin 10% |
| Revenue $2,000, cost $1,200 | Profit $800, margin 40% |
| Revenue $150, cost $90 | Profit $60, margin 40% |
| Revenue $75, cost $60 | Profit $15, margin 20% |
Frequently asked questions
Margin divides profit by revenue; markup divides profit by cost. A 30% margin on $500 revenue ($150 profit) equals a 42.9% markup on $350 cost.
It depends on the industry. Software often exceeds 70% gross margin; retail and restaurants typically run 25–70%. Compare against your sector benchmarks.
Gross margin subtracts only direct costs (COGS). Net margin subtracts all expenses including overhead, taxes, and interest. Net is the bottom-line measure.