Profit margin calculator
Gross and net profit margin from revenue and costs, or the price you need for a target margin.
- ๐บ๐ธ US federal & state rules
Net profit margin
16%
$8,000.00 net profit on $50,000.00
- Gross margin
- 40%
- Gross profit
- $20,000.00
- Net profit
- $8,000.00
- Markup
- 66.67%
This is an example. Enter your numbers above and press the button to see your own result.
- Gross margin uses only the cost of goods sold. Net margin also takes out the other expenses you enter, such as rent, payroll, ads and fees.
- Income tax is not included. For an after-tax net margin, add your estimated tax to other expenses.
Show the math
| Gross profit | $50,000.00 โ $30,000.00 = $20,000.00 |
|---|---|
| Gross margin | $20,000.00 รท $50,000.00 = 40% |
| Net profit | $20,000.00 โ $12,000.00 = $8,000.00 |
| Net margin | $8,000.00 รท $50,000.00 = 16% |
What to do next
How it works
Gross profit is revenue minus cost of goods sold. Gross margin is that profit divided by revenue. If you add other expenses, the calculator also takes them out for net profit and net margin.
In target mode, it adds your costs and divides by one minus the margin you want, which gives the price that leaves exactly that share as profit.
Things to keep in mind
Use the same period for every number. Mixing a month of expenses with a year of sales will make the margin look far better than it is.
Income tax is left out. Many small businesses look at margin before tax because the tax depends on the owner's whole return.
Frequently asked questions
How do I calculate profit margin?
Subtract costs from revenue and divide by revenue. $50,000 in sales with $30,000 in product costs is a $20,000 gross profit and a 40% gross margin.
What is the difference between gross and net margin?
Gross margin only takes out the cost of goods sold. Net margin also takes out operating costs like rent, wages and ads, so it is always lower.
What price gives me a 30% margin?
Divide your cost by 0.70. A $70 cost needs a $100 price. Multiplying $70 by 1.30 gives $91, which is only a 23% margin.
What is a good profit margin?
It varies a lot by industry. Grocery stores often run net margins in the low single digits, while software companies can be far higher. Compare against businesses like yours.