Profit Margin Calculator
Calculate your profit margins, markup percentage, and optimal pricing. Understand your business profitability and set prices that ensure healthy margins.
Enter Your Numbers
Total income from sales before any costs
Direct costs: materials, inventory, production labor
Overhead: rent, salaries, marketing, utilities, insurance
Your Profitability
Breakdown
Pricing Strategy
How much profit do you want to keep after all expenses?
To Achieve $3,000 Profit:
This covers $4,000 COGS + $3,000 expenses + $3,000 desired profit.
Net margin at this revenue: 30.0%
How It Works
This calculator uses standard accounting formulas: Gross Profit = Revenue - COGS, Net Profit = Gross Profit - Operating Expenses. Margins are calculated as (Profit ÷ Revenue) × 100.
Gross vs net profit: Gross profit shows efficiency of production or service delivery. Net profit shows overall business health after all costs. You can have strong gross margins but low net margins if overhead is too high.
Markup vs margin: Markup is profit divided by cost (how much you add to cost). Margin is profit divided by selling price (what percentage of the sale is profit). A 100% markup = 50% margin. Many businesses confuse these, leading to underpricing.
Target margins by industry (typical benchmarks, not guarantees): Restaurants: 3-5% net, 60-70% gross. Retail: 5-10% net, 30-50% gross. SaaS: 20-30% net, 70-85% gross. Service businesses: 15-30% net, 50-70% gross. These are typical ranges observed across industries, not rigid standards. Your specific costs, positioning, and efficiency matter more than hitting these exact numbers.
Example Scenarios
E-commerce Store
Revenue: $50,000, COGS: $20,000 (products + shipping), Operating expenses: $15,000 (ads, tools, fulfillment). Gross profit: $30,000 (60% margin). Net profit: $15,000 (30% margin). Healthy margins, room for growth investment.
Consulting Business
Revenue: $20,000, COGS: $2,000 (contractor help, tools), Operating expenses: $8,000 (salary, office, software). Gross profit: $18,000 (90% margin). Net profit: $10,000 (50% margin). Low COGS typical for service businesses.
Cafe
Revenue: $30,000, COGS: $10,000 (food, drink supplies), Operating expenses: $18,000 (rent, staff, utilities). Gross profit: $20,000 (67% margin). Net profit: $2,000 (6.7% margin). Typical tight margins for food service, success depends on volume.
Frequently Asked Questions
What is a good profit margin for small business?
A healthy net profit margin for small businesses is typically 10-20% (editable industry benchmark). Service businesses often achieve 15-30% margins, while retail typically sees 5-10%. Your target depends on industry, overhead, and business model. These are general guidelines, not rigid targets.
What is the difference between gross profit and net profit?
Gross profit is revenue minus cost of goods sold (direct costs). Net profit is gross profit minus operating expenses (rent, salaries, marketing). Net profit is what you actually keep.
How do I calculate markup vs margin?
Markup is profit divided by cost: (Selling Price - Cost) ÷ Cost. Margin is profit divided by selling price: (Selling Price - Cost) ÷ Selling Price. A 50% markup = 33% margin. They measure profitability differently.
What should I include in cost of goods sold?
COGS includes direct costs to deliver your product or service: raw materials, inventory, manufacturing labor, packaging, shipping. It does NOT include overhead like rent, salaries, or marketing (those are operating expenses).
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