Profit Margin Calculator

How to Use the Profit Margin Calculator

What is the profit margin formula?

Profit margin is profit divided by revenue, shown as a percentage. The three common versions differ only in which costs you take off first: gross margin removes the direct cost of what you sold, operating margin also removes overhead, and net margin removes everything, including interest and tax.

Break-even revenue here is the sales level where net profit is zero if your costs and gross margin stay as entered. The Break Even Calculator does the same job per unit.

Worked example: gross, operating and net margin

A business has $250,000 of revenue, $150,000 of COGS, $60,000 of operating expenses and $5,000 of interest and tax. Gross profit is $250,000 − $150,000 = $100,000, a 40% gross margin. Operating profit is $100,000 − $60,000 = $40,000, a 16% operating margin. Net profit is $40,000 − $5,000 = $35,000, a 14% net margin.

Markup on COGS is $100,000 ÷ $150,000 = 66.7%. Break-even revenue is ($60,000 + $5,000) ÷ 40% = $162,500. The 24-point gap between gross and operating margin is overhead as a share of sales.

Gross profit margin example for students (GCSE and A level business)

Business courses use the same formula with different names: revenue is often called turnover and COGS is cost of sales. A shop has turnover of $80,000 and cost of sales of $52,000, so gross profit is $28,000 and the gross profit margin is $28,000 ÷ $80,000 × 100 = 35%. After $19,000 of expenses, net profit is $9,000 and the net profit margin is 11.25%. Write the formula first, show each step and give the answer as a percentage.

What is the difference between markup and margin?

Both use the same profit, but margin divides it by the selling price and markup divides it by the cost. A product costing $60 and selling for $100 earns $40, which is a 40% margin and a 66.7% markup. Setting a price with a 40% markup when you meant a 40% margin underprices every unit.

Read across a row: a 25% margin needs a 33.3% markup, and a 50% margin needs a 100% markup, which means selling at double cost.

How do I calculate profit margin with VAT, GST or sales tax?

Take the tax out of the price first, because you collect it for the tax authority. A product costing $70 that sells for $120 including a 20% tax (an example rate; use your own) has a net price of $120 ÷ 1.20 = $100. Profit is $100 − $70 = $30, so the margin is 30% and the markup is 42.9%. If you skip the step, you report $50 of profit and a 41.7% margin, which overstates both. The product calculator above strips the tax out for you, in any currency.

How do I calculate profit margin on Amazon or another marketplace?

Treat the platform's fee as a cost of each sale. For a $29.99 item costing $12 with a 15% fee on the price (an illustration, so check the platform's current fees), the fee is $4.50, profit is $29.99 − $4.50 − $12 = $13.49, the margin is about 45% and the markup is 112.4%. Add shipping, advertising and returns to your cost per unit if you pay them, or the margin will read too high.

How do I work out the selling price for a target margin?

Divide your cost by one minus the margin you want. For a $60 cost and a 40% margin the price is $60 ÷ 0.60 = $100. With a 20% tax and a 15% fee (example rates), the calculator solves the price without tax as cost ÷ (1 − fee − margin), then adds the tax back, so enter the tax rate, the fee and your target margin to see the price on the shelf.

What are typical profit margins by industry?

Margins differ widely by business model. These are industry figures for US listed companies from Aswath Damodaran's January 2026 dataset at NYU Stern. They describe large public firms, so a small business should expect different figures and compare itself with its own sector over time.

The spread is the lesson: software earns a high gross margin because each extra copy costs little, while grocery retail runs a thin net margin on volume. A margin that looks poor in one sector can be strong in another.

How do I calculate profit margin in Excel or Google Sheets?

Put revenue in B1, COGS in B2, operating expenses in B3 and the cost of one unit in B4, then use:

Gross profit            =B1-B2
Gross margin            =(B1-B2)/B1
Operating margin        =(B1-B2-B3)/B1
Markup                  =(B1-B2)/B2
Price for target margin =B4/(1-0.4)

Format the margin cells as percentages. In the last line, 0.4 is a 40% target margin and B4 is the cost of one unit, so the formula returns the price.

How can I improve my profit margin?

Four levers move it: raise prices, cut COGS, cut operating expenses, or grow revenue faster than costs. A 1% price rise on $1,000,000 of revenue adds $10,000 of profit if volume holds, which is why price is often the strongest lever. Cutting COGS through supplier terms comes next, and trimming overhead helps until it starts to hurt quality or growth. To test whether a spend such as new software or automation pays for itself, use the ROI Calculator or the AI Automation ROI Calculator.

Does this change by country?

The formulas do not. The dollar sign is a label, so enter your own currency. What changes is vocabulary (UK and Australian accounts often say turnover for revenue) and tax: VAT in the UK, GST in Australia, Canada and New Zealand, and sales tax in the US. Enter your own rate in the product calculator rather than relying on a default.