Profit Margin Calculator

Calculate profit margin, revenue, cost, and profit for your business

Calculate Profit Margin

What do you want to calculate?

Cost (COGS)

Cost of Goods Sold

Revenue (Sales)

Total sales amount

Calculation Results

$30.00

Cost

$50.00

Revenue

$20.00

Profit

40.00%

Margin

📊 Profitability Assessment

Margin Level:Excellent

Exceptional margins

Margin Details

Profit Margin:40.00%

Markup:66.67%

Profit per $1 Revenue:$0.40

Formula Used

Profit Margin =

(Revenue - Cost) ÷ Revenue × 100

= ($50.00 - $30.00) ÷ $50.00 × 100

= 40.00%

💡 Business Insights

💰 For every $$1.00 in sales, you keep $0.40 as profit

🎯 Excellent margins! You have room for price competition or reinvestment in growth

📈 Markup: 66.67% - This is how much you mark up your costs

Example Calculation

Retail Product Example

Cost of Goods: $30.00

Selling Price: $50.00

Calculation Steps

1. Calculate Profit: $50 - $30 = $20

2. Calculate Margin: ($20 ÷ $50) × 100 = 40%

3. Calculate Markup: ($20 ÷ $30) × 100 = 66.67%

Result

A 40% profit margin means you keep $0.40 of every dollar in revenue. This is considered a good margin for most retail businesses.

Margin Benchmarks

Below 5%

Poor - Very risky

5% - 10%

Fair - Room for improvement

10% - 20%

Good - Healthy business

20% - 30%

Very Good - Strong position

Above 30%

Excellent - Market leader

* Benchmarks vary by industry. Compare with similar businesses.

Typical Industry Margins

Software/SaaS70-90%

Restaurants3-5%

Retail (General)2-4%

Automotive5-10%

Healthcare10-18%

Approximate net margins. Gross margins are typically higher.

Profit Tips

✓

Track your margins regularly to spot trends

✓

Higher margins provide cushion for errors

✓

Compare margins with industry standards

✓

Consider both gross and net margins

✓

Focus on value, not just low prices

✓

Reduce costs without compromising quality

Understanding Profit Margin

What is Profit Margin?

Profit margin is a profitability ratio that measures how much profit a business makes for every dollar of revenue. It's expressed as a percentage and shows what portion of sales has turned into profits.

Why is it Important?

•Measures business health and efficiency
•Helps with pricing decisions
•Enables comparison with competitors
•Identifies areas for improvement

Profit Margin Formulas

Profit Margin =
(Revenue - Cost) ÷ Revenue × 100

Or:
Profit ÷ Revenue × 100

Key Terms

Revenue: Total sales amount
Cost: Cost of Goods Sold (COGS)
Profit: Revenue minus Cost
Margin: Profit as % of Revenue
Markup: Profit as % of Cost

Margin vs. Markup

Profit Margin

• Based on revenue (selling price)
• Formula: Profit ÷ Revenue × 100
• Shows profitability percentage
• Used for financial analysis
• Always lower than markup

Markup

• Based on cost (what you paid)
• Formula: Profit ÷ Cost × 100
• Shows pricing strategy
• Used for pricing decisions
• Always higher than margin

Example: If cost is $30 and selling price is $50, profit is $20. Margin = $20/$50 = 40%, but Markup = $20/$30 = 66.67%. Same profit, different perspectives!

Types of Profit Margins

Gross Margin

Revenue minus cost of goods sold. Doesn't include operating expenses. Shows production efficiency.

Operating Margin

Includes operating expenses like rent, salaries. Shows operational efficiency before taxes and interest.

Net Margin

All expenses included (taxes, interest, etc.). Shows overall profitability after everything is paid.

How to Improve Profit Margin

✅ Increase Revenue

• Raise prices strategically
• Upsell and cross-sell
• Add premium products/services
• Improve marketing effectiveness
• Expand to new markets

✅ Reduce Costs

• Negotiate with suppliers
• Reduce waste and inefficiency
• Automate processes
• Buy in bulk when beneficial
• Optimize inventory management