Profit Margin Calculator
Calculate gross and net profit margins, find optimal selling prices, or determine maximum costs for your target margins. Free and instant.
Last updated: March 2026
Average Profit Margins by Industry
Reference these industry benchmarks to see how your margins compare
| Industry | Gross Margin | Net Margin |
|---|---|---|
| Grocery Stores | 25-30% | 1-3% |
| Restaurants | 60-70% | 3-9% |
| Retail Clothing | 45-55% | 4-13% |
| Software/SaaS | 70-90% | 15-25% |
| Professional Services | 50-70% | 10-20% |
| Construction | 15-25% | 2-10% |
| Auto Repair | 40-50% | 5-10% |
| Salon/Spa | 40-60% | 5-15% |
How to Calculate Profit Margins
Choose Calculation Type
Select gross margin, net margin, selling price, or max cost based on what you need.
Enter Your Numbers
Input revenue, costs, expenses, or target margins depending on your calculation.
Get Your Results
See your profit margins, markups, and target prices instantly with detailed breakdowns.
Profit Margin Formulas
Gross Profit Margin
Example: ($100,000 - $60,000) / $100,000 = 40%
Net Profit Margin
Example: $15,000 / $100,000 = 15%
Selling Price from Margin
Example: $60 / (1 - 0.40) = $100
Maximum Cost from Margin
Example: $100 × (1 - 0.40) = $60
Margin vs. Markup: Understanding the Difference
These terms are often confused, but they calculate profit differently
Profit Margin
Profit as a percentage of the selling price.
Margin = Profit / Selling Price
If you sell for $100 with $30 profit: 30% margin
Markup
Profit as a percentage of the cost.
Markup = Profit / Cost
If cost is $70, profit is $30: 42.9% markup
Key Insight: A 50% markup does NOT equal a 50% margin. 50% markup = 33.3% margin.
Frequently Asked Questions
What is profit margin?
Profit margin is a financial metric that measures the percentage of revenue that remains as profit after subtracting costs. It shows how efficiently a business converts sales into actual profit. Higher margins mean better profitability.
What is the difference between gross and net profit margin?
Gross profit margin only accounts for the cost of goods sold (direct costs), while net profit margin includes all expenses like operating costs, taxes, and interest. Gross margin shows production efficiency; net margin shows overall profitability.
What is a good profit margin?
A 'good' profit margin varies by industry. Generally, a net profit margin of 10% is average, 20% is good, and 5% or less is low. Grocery stores operate on 1-3% margins while software companies may achieve 20%+ margins.
How do I calculate gross profit margin?
Gross Profit Margin = ((Revenue - Cost of Goods Sold) / Revenue) × 100. For example, if you sell a product for $100 that cost $60 to make, your gross margin is (($100-$60)/$100) × 100 = 40%.
What is the difference between margin and markup?
Margin is profit as a percentage of selling price, while markup is profit as a percentage of cost. A 50% markup on a $100 cost gives $150 price, but the margin is only 33%. They're related but calculated differently.
How do I set prices to achieve a target margin?
Selling Price = Cost / (1 - Target Margin%). For example, to achieve a 40% margin on a $60 product: $60 / (1 - 0.40) = $60 / 0.60 = $100 selling price.
Why is my net margin lower than gross margin?
Net margin includes all operating expenses (rent, salaries, utilities, marketing, etc.) beyond just the cost of goods. These additional costs reduce your net profit, resulting in a lower net margin percentage.
How can I improve my profit margins?
Increase prices strategically, reduce cost of goods through supplier negotiations, decrease operating expenses, focus on higher-margin products/services, increase sales volume to spread fixed costs, and eliminate unprofitable offerings.
What costs should I include in cost of goods sold?
COGS includes direct costs to produce/acquire products: raw materials, direct labor, manufacturing overhead, packaging, and freight-in. It excludes indirect costs like rent, marketing, and administrative salaries.
How often should I calculate profit margins?
Calculate margins monthly at minimum, but weekly or daily is better for retail businesses. Regular monitoring helps identify trends, spot problems early, and make timely pricing or cost adjustments.
Running a Small Business?
Stop missing customer calls while you're busy. Ringlii answers your business calls 24/7, takes messages, and helps you never lose a lead.
Start Your Free Trial7-day free trial | Keep your number | Setup in under 5 minutes