Profit Margin Calculator
Get margin, markup, and break-even in one click — price with confidence.
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Frequently asked questions
What is profit margin and why is it important?
Profit margin is the percentage of revenue that remains as profit after deducting costs. It's a key indicator of business health and pricing effectiveness. A healthy profit margin ensures your business can cover expenses, invest in growth, and remain competitive while generating sustainable profits.
What's the difference between margin and markup?
Margin is calculated as (Price − Cost) ÷ Price and represents profit as a percentage of the selling price. Markup is calculated as (Price − Cost) ÷ Cost and represents profit as a percentage of the cost. For example, a $100 item with $60 cost has a 40% margin but a 66.7% markup.
How do I calculate gross profit margin?
Gross profit margin is calculated by subtracting Cost of Goods Sold (COGS) from revenue, then dividing by revenue and multiplying by 100. Formula: ((Revenue − COGS) ÷ Revenue) × 100. Our calculator does this automatically for both markup-based and revenue-based scenarios.
What is a good profit margin for my business?
Good profit margins vary by industry. Retail typically sees 2-5%, restaurants 3-5%, software/SaaS 70-90%, and professional services 15-20%. Compare your margins to industry benchmarks, but also consider your business model, operating costs, and growth stage when evaluating performance.
Should I use markup-based or revenue-based calculation?
Use markup-based when setting prices for new products—you know your costs and desired markup percentage. Use revenue-based when analyzing existing sales—you have actual revenue and COGS data and want to understand your current profit margins.
How can I improve my profit margins?
Improve margins by: 1) Reducing COGS through better supplier negotiations or bulk purchasing, 2) Increasing prices where market allows, 3) Improving operational efficiency to reduce waste, 4) Focusing on higher-margin products, 5) Reducing overhead costs, and 6) Adding value to justify premium pricing.
What's the difference between gross margin and net margin?
Gross margin only considers direct costs (COGS) and shows profitability before operating expenses. Net margin includes all expenses (COGS, operating costs, taxes, interest) and represents your true bottom-line profitability. This calculator focuses on gross margin for pricing decisions.
Can I use this for service-based businesses?
Yes. For services, your 'cost' includes labor, materials, and direct expenses for delivering the service. Calculate your fully-loaded hourly rate (including overhead allocation) and use that as your cost basis to determine appropriate service pricing and margins.
How often should I review my profit margins?
Review margins monthly at minimum, or whenever costs change significantly. Regular reviews help you spot trends, respond to cost increases, adjust pricing proactively, and ensure your business remains profitable as market conditions evolve.
Does this calculator save my data?
No. All calculations happen in your browser in real-time. We don't store or transmit your business data. This ensures complete privacy for your pricing and cost information.