Profit Margin Calculator — Gross, Net & Operating Margin

Gross margin, markup, and profit in one place.

Currency

Revenue (selling price)

Cost (COGS)

Gross profit

$40,000.00

Margin: 40.00%
Markup: 66.67%

Formula used

Margin % = (Revenue − COGS) / Revenue × 100

Margin is profit as a % of revenue. Markup is profit as a % of cost. A 50% markup is the same as a 33.3% margin.

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The three margins

“Profit margin” isn't one number — it's three. Each one subtracts a different layer of cost from revenue, so they answer different questions about your business.

Gross margin

How much money is left after paying for the product or service itself — the cost of goods sold (COGS). This is the ceiling for everything else.

Gross = (Revenue − COGS) / Revenue × 100

Operating margin

Gross margin minus operating expenses (rent, salaries, marketing, software). Shows whether the core business is profitable before financing and tax effects.

Operating = (Revenue − COGS − OpEx) / Revenue × 100

Net margin

What's actually left for the owners after every cost — COGS, OpEx, interest on debt, and taxes. This is the bottom line.

Net = (Revenue − all expenses incl. tax & interest) / Revenue × 100

Worked example

Imagine a small business with the following annual numbers:

Revenue: $100,000
COGS: $60,000
Operating expenses: $25,000
Interest: $3,000
Taxes: $4,000

Plug each layer into the formulas above:

Gross margin = (100,000 − 60,000) / 100,000 = 40% (gross profit $40,000)
Operating margin = (100,000 − 60,000 − 25,000) / 100,000 = 15% (operating profit $15,000)
Net margin = (100,000 − 60,000 − 25,000 − 3,000 − 4,000) / 100,000 = 8% (net profit $8,000)

The gap between 40% gross and 8% net is where most of the business actually lives — and where the biggest improvement levers usually are.

What's a good profit margin?

There's no universal benchmark — margins depend heavily on industry, scale, and business model. Typical ranges:

SaaS & software: 70–90% gross margin (digital delivery, near-zero marginal cost).
Retail: 25–50% gross margin; 2–5% net is common.
Restaurants: 5–15% net margin — labor and food cost dominate.
Ecommerce: 30–50% gross margin, 5–10% net after ads, shipping, and returns.
Manufacturing: 25–35% gross margin, with heavy dependence on input prices.

FAQs

What's the difference between margin and markup?

Margin is profit as a percentage of revenue. Markup is profit as a percentage of cost. If an item costs $60 and sells for $100, profit is $40. Margin is 40/100 = 40%, but markup is 40/60 = 66.7%. The two numbers are always different, and markup is always larger than the equivalent margin.

Is a 30% profit margin good?

It depends on the industry. A 30% net margin is excellent for retail, restaurants, or manufacturing, and average for SaaS or software. A 30% gross margin is healthy for ecommerce or distribution but low for SaaS. Always benchmark against direct competitors, not across industries.

How can I increase my profit margin?

Two levers: raise revenue (pricing, mix, upsell) or cut cost (negotiate supplier rates, consolidate vendors, reduce waste, switch materials). Procurement-side wins typically drop straight to the bottom line, which is why a 1% cost reduction outweighs a 5% sales bump for most businesses.

Why is gross margin higher than net margin?

Gross margin only subtracts the cost of goods sold (COGS) from revenue. Net margin also subtracts operating expenses, interest, and taxes. Because each layer removes more cost, net margin is always lower than (or equal to) gross margin.