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 your gross, operating and net profit margins from your revenue and cost figures, and also returns your markup on cost and your break-even revenue so you can see the full picture in one place.
How Profit Margin Is Calculated
Every margin is simply a profit divided by revenue, expressed as a percentage. What changes is which costs you subtract before you divide. Gross profit deducts only the cost of goods sold; operating profit also deducts operating expenses; net profit deducts tax (and interest) as well. The key rule is that margin is always measured against revenue — the selling price — not against cost, which is what markup measures.
- Gross profit margin — revenue minus cost of goods sold (COGS), as a percentage of revenue. Measures production and sourcing efficiency.
- Operating profit margin (EBIT) — gross profit minus operating expenses (rent, wages, utilities). Shows profitability from core operations before tax and interest.
- Net profit margin — operating profit minus tax and interest. The bottom-line measure of overall profitability.
Worked Example: €100,000 Revenue
Using the calculator's default figures — €100,000 revenue, €60,000 cost of goods sold, €15,000 operating expenses and a 25% tax rate — the result is:
| Step | Amount / Margin |
|---|---|
| Gross profit (€100,000 − €60,000 COGS) | €40,000.00 · 40.00% |
| Operating profit / EBIT (− €15,000 expenses) | €25,000.00 · 25.00% |
| Net profit (after 25% tax) | €18,750.00 · 18.75% |
| Markup on COGS (€40,000 ÷ €60,000) | 66.67% |
| Break-even revenue (expenses ÷ gross margin) | €37,500.00 |
Change the four inputs above to model your own business — the margins, markup and break-even point recalculate when you press the button.
What Is a Good Profit Margin?
Average profit margins vary significantly by industry, so benchmarking against your own sector is far more useful than applying a single universal target. As a rough guide:
| Industry | Typical net margin |
|---|---|
| Supermarkets & grocery retail | 1–3% |
| General retail & e-commerce | 2–10% |
| Restaurants & hospitality | 3–9% |
| Manufacturing | 5–10% |
| Professional services | 10–20% |
| Software & SaaS | 20–40% |
These are broad ranges, not targets — a healthy margin for a high-volume grocer would be alarming for a software firm, and vice versa. Track your own margin trend over time as the most reliable signal.
Markup vs. Margin
Markup and margin are related but different, and confusing the two is one of the most common pricing mistakes. Margin is profit as a percentage of the selling price, while markup is profit as a percentage of the cost. A product costing €60 and selling for €100 has a 40% margin but a 66.7% markup. To convert between them, use Markup = Margin ÷ (1 − Margin): a 25% margin is a 33.3% markup, and a 50% margin is a 100% markup (double the cost).
Using Margin to Set Prices
To achieve a target gross margin, work backwards from the margin to the price with the formula Selling Price = Cost ÷ (1 − Target Margin). For example, to make a 40% gross margin on a €60 cost, you need a selling price of €60 ÷ 0.60 = €100. Setting prices by adding a fixed markup to cost is simpler, but pricing to a target margin keeps your profitability consistent even as costs change.
How to Improve Your Profit Margin
There are only a handful of levers, and most businesses can pull several at once. You can raise prices where the market allows, lower your cost of goods sold by renegotiating with suppliers or reducing waste, cut operating expenses, drop or reprice products that sit below your target margin, and shift your sales mix toward higher-margin lines. Small percentage gains compound: a two-point improvement in gross margin often translates into a much larger swing in net profit once fixed costs are covered.
Frequently Asked Questions
How do I calculate profit margin? Profit margin = profit ÷ revenue × 100. For gross margin, profit is revenue minus cost of goods sold; for net margin it is profit after all expenses, interest and tax. Always divide by revenue (the selling price), not by cost.
What's the difference between gross, operating and net margin? Gross margin = (Revenue − COGS) ÷ Revenue. Operating margin subtracts operating expenses too. Net margin subtracts all expenses including tax and interest. Each shows profitability at a different level.
What is the difference between margin and markup? Margin is profit as a percentage of the selling price; markup is profit as a percentage of the cost. A product costing €60 sold for €100 has a 40% margin but a 66.7% markup. Quoting markup as if it were margin overstates profitability.
How do I calculate markup from margin? Markup = Margin ÷ (1 − Margin). A 25% margin equals a 33.3% markup on cost. A 50% margin equals a 100% markup (double the cost).
How do I use margin to set a selling price? Use Selling Price = Cost ÷ (1 − Target Margin). To make a 40% gross margin on a €60 cost, sell at €60 ÷ 0.60 = €100. This works backwards from the margin you want to the price you must charge.
What's a good profit margin? Highly industry-dependent. Retail and supermarkets average 1–5% net margin; manufacturing 5–10%; software 20–40%; restaurants 3–9%. Benchmark against your own sector, not across sectors.
What is break-even revenue? Break-even revenue is the sales level at which operating profit is zero. With this calculator it equals operating expenses ÷ gross margin. At €15,000 of expenses and a 40% gross margin, you break even at €37,500 of revenue.
How can I improve my profit margin? Raise prices where the market allows, lower cost of goods sold by renegotiating with suppliers or reducing waste, cut operating expenses, drop or reprice low-margin products, and shift the sales mix toward higher-margin lines.
Last reviewed: June 2026. Estimates only — confirm exact figures with the relevant authority or a qualified adviser before acting.