About the Profit Margin Calculator
The Profit Margin Calculator is free to use and all calculations run entirely in your browser. Profit margins are among the most important metrics for any business, showing how efficiently it converts revenue into actual profit. This calculator computes gross, operating, and net profit margins from your revenue and cost figures.
Types of Profit Margin
- Gross profit margin — revenue minus cost of goods sold (COGS), expressed as a percentage of revenue. Measures production efficiency.
- Operating profit margin — gross profit minus operating expenses (rent, wages, utilities). Shows profitability from core operations.
- Net profit margin — operating profit minus tax and interest. The bottom-line measure of overall profitability.
What Is a Good Profit Margin?
Average profit margins vary significantly by industry. Software companies may achieve net margins of 20–30%, while supermarkets and retailers often operate on 1–5%. Manufacturing businesses typically fall between 5–10%. Comparing your margins to industry benchmarks is more useful than applying a universal target.
Markup vs. Margin
Markup and margin are related but different. Margin is the profit as a percentage of the selling price, while markup is the profit as a percentage of the cost. For example, a product costing €80 and selling for €100 has a 20% margin but a 25% markup. Confusing the two is a common pricing mistake.
Using Margin to Set Prices
To achieve a target gross margin, use the formula: Selling Price = Cost ÷ (1 − Target Margin). For instance, to achieve a 40% gross margin on a €60 cost, you need a selling price of €100. This calculator helps you work backwards from a desired margin to set competitive and profitable prices.
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