Profit Margin Calculator
Enter your revenue and costs to instantly calculate your profit margin.
What is Profit Margin?
Profit margin measures how much of each dollar of revenue a business keeps as profit. It is one of the most important indicators of business profitability and efficiency.
Profit Margin Formula
Profit Margin = (Revenue − Cost) ÷ Revenue × 100
For example: if your revenue is $10,000 and your costs are $7,000, your profit is $3,000 and your profit margin is 30%.
Profit Margin vs Markup
While profit margin is based on revenue, markup is based on cost. A 30% margin is not the same as a 30% markup. Learn more in our detailed guide: Profit Margin vs Markup — What’s the Difference?
Types of Profit Margin
There are three main types of profit margin, each measuring a different level of profitability:
- Gross Profit Margin — revenue minus cost of goods sold. Use our Gross Profit Margin Calculator.
- Net Profit Margin — all expenses deducted, including taxes and interest. Use our Net Profit Margin Calculator.
- Operating Profit Margin — revenue minus operating expenses, before taxes and interest.
What is a Good Profit Margin?
A “good” profit margin varies by industry. Retail businesses often aim for 2–5%, while software companies can achieve 20–40%. As a general rule, higher is better — but always compare within your industry.
Frequently Asked Questions
What is the difference between gross and net profit margin?
Gross profit margin only subtracts the cost of goods sold, while net profit margin subtracts all expenses including taxes, interest, and operating costs.
Can profit margin be negative?
Yes. A negative profit margin means you are spending more than you are earning — your business is operating at a loss.
How do I improve my profit margin?
You can improve margins by increasing prices, reducing production costs, or improving operational efficiency.