Profit Margin Calculator
Calculate gross, operating, and net profit margin. Enter your revenue and costs below.
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The profit margin formula
There are three core margin formulas every business owner should know:
- Gross Margin % = (Revenue − COGS) ÷ Revenue × 100
- Operating Margin % = Operating Income ÷ Revenue × 100
- Net Margin % = Net Income ÷ Revenue × 100
- Markup % = (Revenue − COGS) ÷ COGS × 100
Gross margin formula — worked example
Suppose your business earns £120,000 in revenue and has £72,000 in COGS:
- Gross Profit = £120,000 − £72,000 = £48,000
- Gross Margin = £48,000 ÷ £120,000 × 100 = 40%
That means 40p of every £1 of revenue is left after paying for direct costs.
Net margin formula — worked example
Continuing the example: operating expenses are £20,000 and tax is £6,000.
- Operating Income = £48,000 − £20,000 = £28,000 → 23.3% operating margin
- Net Income = £28,000 − £6,000 = £22,000 → 18.3% net margin
Margin vs markup — what's the difference?
Margin is measured as a % of selling price. Markup is measured as a % of cost. A 50% markup does not equal a 50% margin — it equals a 33% margin. Never confuse them.
What is a good profit margin?
Benchmarks vary widely by industry. Software / SaaS companies often achieve 60–80% gross margins. Retail averages 20–40%. Restaurants typically run 3–9% net margin. Always benchmark against your specific industry before drawing conclusions.
Frequently asked questions
Can profit margin be negative?
Yes. A negative margin means costs exceed revenue. Common in early-stage businesses, but it must be temporary.
Why use this calculator instead of a spreadsheet?
Our calculator handles all three margin types simultaneously, plus markup, with instant results — no formulas to set up.