Calculate gross margin, operating margin, net profit margin, and markup. Essential for pricing strategy and business planning.
Rent, salaries, marketing, utilities, etc.
💡 Industry Benchmark: Enter your numbers to see how you compare.
Retail
Gross: 25-50%
Net: 2-10%
Restaurant
Gross: 60-70%
Net: 3-6%
Software/SaaS
Gross: 80-90%
Net: 15-30%
Manufacturing
Gross: 20-35%
Net: 5-12%
Construction
Gross: 15-25%
Net: 3-7%
Healthcare
Gross: 40-60%
Net: 5-12%
Real Estate
Gross: 40-60%
Net: 10-20%
E-commerce
Gross: 30-45%
Net: 5-15%
Profit margin is one of the most important metrics for any business. It measures how much profit you keep from every dollar of revenue. For example, a 20% profit margin means you keep $0.20 for every $1 of sales.
There are three key profit margins every business owner should track: Gross Margin (revenue minus direct product costs), Operating Margin (after operating expenses), and Net Margin (after all expenses, taxes, and interest).
☕ Coffee Shop
Revenue: $50,000 | COGS: $15,000 | OpEx: $25,000
→ Gross: 70% | Net: 20% (Excellent!)
👕 Clothing Retail
Revenue: $100,000 | COGS: $50,000 | OpEx: $40,000
→ Gross: 50% | Net: 10% (Average)
💻 SaaS Company
Revenue: $200,000 | COGS: $20,000 | OpEx: $120,000
→ Gross: 90% | Net: 30% (Excellent!)
🍔 Fast Food
Revenue: $75,000 | COGS: $25,000 | OpEx: $40,000
→ Gross: 67% | Net: 13% (Good)
Profit Margin
Profit ÷ Revenue × 100
$150 selling price, $100 cost = 33.3% margin
Markup
(Profit ÷ Cost) × 100
$150 selling price, $100 cost = 50% markup
⚠️ Critical Distinction: 50% markup = 33% margin. Never confuse them when pricing products!
💰
Increase Prices
Even 5% increase can boost net margin significantly
📦
Reduce COGS
Negotiate with suppliers, buy in bulk
⚡
Lower Operating Costs
Automate, outsource, reduce waste
It depends on your industry. Retail: 2-10% net margin is normal. Software: 15-30% is excellent. Services: 10-20% is healthy. Use our industry benchmarks above as a guide.
Gross margin = Revenue - COGS. Net margin = Revenue - ALL expenses (COGS + operating + taxes + interest). Net margin is the true measure of profitability.
Selling Price = Cost ÷ (1 - Desired Margin). Example: $100 cost, want 30% margin → $100 ÷ 0.7 = $142.86
Operating margin of 15%+ is excellent for most industries. 10-15% is good. Below 5% may indicate trouble covering operating expenses.
Net margin subtracts ALL expenses (rent, salaries, marketing, taxes, interest). If net margin is much lower than gross margin, you have high operating costs.
Breakeven Units = Fixed Costs ÷ (Selling Price - Variable Cost). Example: $10,000 fixed costs ÷ ($100 - $50) = 200 units to breakeven.
⚠️ Disclaimer: This profit margin calculator provides estimates for educational purposes. Consult a CPA or financial advisor for accurate business financial planning.