Profit Margin Calculator
Use this profit margin calculator to determine how much profit you make on a product or service after costs. Enter your cost and selling price to calculate your gross margin percentage. This tool is useful for small businesses, ecommerce sellers, and pricing decisions.
Pricing Details
Profit Analysis
Enter cost and price to calculate profit margin.
How Profit Margin Works
Profit margin expresses profit as a percentage of revenue. The formula is: Margin = (Selling Price − Cost) ÷ Selling Price × 100. It tells you what fraction of every dollar in revenue you keep after covering costs. A 30% margin means you keep $0.30 of every $1 earned — the rest covers expenses.
This calculator shows gross margin, which only accounts for direct product costs (cost of goods sold). Operating margin additionally subtracts overhead costs like rent and salaries. Net margin subtracts everything including taxes and interest. When someone simply says "profit margin" in a retail or ecommerce context, they usually mean gross margin.
Profit Margin Benchmarks by Industry
What counts as a "good" margin depends heavily on industry. Grocery stores operate on gross margins of 20–25% because of thin markups and high volume. Software companies can exceed 70–80% gross margins since marginal cost per user is near zero. Restaurants typically run 60–70% gross margins on food but often have net margins under 5% after labor and rent. Ecommerce sellers usually aim for 30–50% gross margin to cover shipping, returns, and advertising. Compare your margin to industry peers — a 20% margin might be excellent for electronics but poor for consulting.
Frequently Asked Questions
What is a good profit margin for a small business?
For small businesses, a net profit margin of 10% is considered healthy, 20% is very good, and anything above that is exceptional. Most small businesses land in the 7–10% net margin range after paying all expenses including owner compensation. Gross margins should be significantly higher — 40–60% is a reasonable target for product businesses, giving room to cover overhead, marketing, and taxes and still have something left. If your gross margin is under 30%, small cost increases or slow months can quickly make the business unprofitable.
What's the difference between gross profit margin and net profit margin?
Gross margin only subtracts the direct cost of making or buying what you sell (cost of goods sold). Net margin subtracts all expenses: cost of goods, rent, salaries, marketing, loan interest, and taxes. Gross margin tells you how profitable your core product is. Net margin tells you how profitable the entire business is. A company can have a strong gross margin but a weak net margin if overhead is too high — which is a common issue for fast-growing businesses that scale costs before scaling revenue.
How do I improve my profit margin?
There are two levers: increase revenue per unit or decrease cost per unit. On the revenue side: raise prices (even small increases can have large margin impact), sell higher-margin products, or upsell. On the cost side: negotiate better supplier pricing, reduce waste, improve production efficiency, or consolidate SKUs. Price increases are often the most powerful lever because they flow directly to margin — a 5% price increase on a 20% margin product improves margin by 25% relative. Cutting costs equally on the expense side requires larger absolute cuts for the same margin improvement.