Profit Margin Calculator

Profit margin is profit divided by revenue, expressed as a percentage. There are three standard versions. Gross margin = (revenue − cost of goods sold) ÷ revenue. Operating margin = (gross profit − operating expenses) ÷ revenue. Net margin = (operating profit − taxes, interest and other costs) ÷ revenue. This calculator computes all three at once from the same inputs, so you can see how each layer of cost reduces your margin from the top line down to the bottom line.

They strip out costs in stages. Gross margin removes only the cost of the goods sold — it tells you if your products are profitable. Operating margin also removes overheads like salaries, rent, software, and ads — it tells you if the core business is profitable. Net margin removes everything else, including tax and interest — it tells you what you actually keep. Because each one removes more cost, they always step down in order: gross ≥ operating ≥ net.

Markup is profit as a percentage of COST; margin is profit as a percentage of PRICE. They describe the same profit on different bases, so they are never the same number. A product that costs $50 and sells for $100 has a $50 profit — that is a 100% markup (50 ÷ 50) but only a 50% margin (50 ÷ 100). The exact conversion is margin = markup ÷ (1 + markup). This calculator shows the markup-on-cost equivalent of your gross line right next to the margin so you never quote the wrong one.

Use the identities margin = markup ÷ (1 + markup) and markup = margin ÷ (1 − margin), with both expressed as fractions. For example, a 100% markup (1.0) gives a margin of 1 ÷ (1 + 1) = 0.5, or 50%. Going the other way, a 50% margin (0.5) needs a markup of 0.5 ÷ (1 − 0.5) = 1.0, or 100%. The calculator does this automatically from your revenue and COGS, so you can read the markup figure straight off without doing the algebra.

Net margins in ecommerce are thinner than most people expect because ads and overheads eat much of the gross margin. Under 5% is razor-thin and risky, 5–10% is typical, 10–20% is healthy, and 20%+ is strong. Gross margins are higher — 30–45% is average, 45–60% is good. What counts as "good" varies a lot by category, so it is more useful to track your own net margin trend over time than to chase a single benchmark.

No. Sales tax, VAT, and GST are collected from the buyer and remitted to the government — that money was never yours, so it is neither revenue nor a cost. Including it on either side distorts every margin. Enter your revenue net of sales tax and do not list collected tax as a cost. Income tax is different: it is a genuine cost of being profitable, so it belongs in the "taxes, interest and other" line that takes you from operating profit to net profit.

Because gross margin only accounts for the cost of the goods. The gap between gross and net is everything in between: operating expenses (salaries, rent, software, advertising, marketplace fees) and below-the-line costs (tax, interest). A 50% gross margin routinely shrinks to a single-digit net margin once all of that comes off. A wide gross-to-net gap points to heavy overheads; a narrow gap with a low gross margin points to a pricing or sourcing problem.

COGS (cost of goods sold) is the direct, per-unit cost of the products you actually sold: the goods themselves, inbound freight, packaging, and per-order fulfilment. Operating expenses are the costs of running the business regardless of how many units sell: salaries, rent, software subscriptions, advertising, marketplace fees, and customer support. Keeping the two separate is what makes the gross-to-operating step meaningful — if you lump overheads into COGS, your gross margin looks artificially low and you cannot tell a pricing problem from an overhead one.

Yes. If your costs exceed your revenue, the net profit shows as negative and the net margin as a negative percentage, and the tool flags whether the loss is at the gross line (selling below cost) or below it (overheads). If you leave revenue at zero, every margin is reported as 0% rather than an error — you can't divide by zero — and a warning reminds you to enter your sales. No input ever produces a NaN or infinite result.

Yes. The calculator is currency-agnostic. All your monetary inputs — revenue, COGS, operating expenses, other costs — are read in your own currency, and the margins, profit figures, and markup are universal ratios that don't depend on the currency at all. Outputs and any money in the warnings are formatted in your region's currency automatically, so it works the same whether you sell in dollars, rupees, pounds, euros, or anything else.

It is a margin analysis tool. You enter what already happened — your actual revenue and costs — and it reads back your gross, operating, and net margins so you can see where profit leaks. If you instead want to work forwards from a cost to the price that hits a target margin (with marketplace and payment fees grossed up), use our Selling Price Calculator. The two are complementary: one explains your results, the other sets your prices.

They are essentially the same thing. Operating profit is also called EBIT — Earnings Before Interest and Taxes — so the operating margin in this calculator is the EBIT margin: gross profit minus operating expenses, divided by revenue. The next line down, net margin, is what you get after interest and taxes are also removed. If you only have an operating-profit figure and no below-the-line costs, leave the "taxes, interest and other" field at zero and the net margin will equal the operating margin.