Finance

Profit Margin Calculator

Calculate gross profit margin percentage, revenue, or COGS from any two known values.

Enter values above to calculate profit margin.

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Profit Margin Formulas

Gross Margin

Margin = (Revenue − COGS) / Revenue × 100

Revenue

Revenue = COGS / (1 − Margin / 100)

COGS

COGS = Revenue × (1 − Margin / 100)

What is profit margin and why does it matter?

Profit margin is one of the most important financial metrics for any business. It tells you what fraction of each dollar of revenue you keep as profit after covering the cost of producing or acquiring what you sold. Businesses with high margins can invest more freely in growth, weather downturns, and generate stronger returns for owners and investors.

Tracking profit margin over time — and benchmarking it against industry averages — reveals whether pricing, procurement, or operational efficiency is improving or deteriorating. This calculator supports all three use cases: checking your current margin, finding the revenue needed to hit a margin target, or calculating the maximum allowable COGS for a given margin goal.

Frequently asked questions

What is gross profit margin?
Gross profit margin is the percentage of revenue remaining after subtracting the cost of goods sold (COGS). It measures how efficiently a company produces or sources its products. A higher gross margin means more revenue is available to cover operating expenses, interest, and profit.
How do I calculate gross profit margin?
Subtract COGS from revenue to get gross profit, then divide gross profit by revenue and multiply by 100. For example, if revenue is $50,000 and COGS is $30,000: gross profit is $20,000, and margin is $20,000 / $50,000 × 100 = 40%.
What is a good profit margin?
A healthy gross margin varies significantly by industry. Software and digital products often achieve 70–90% gross margins, while manufacturing and retail typically see 20–50%. Physical goods businesses with thin margins (under 20%) require high volume to generate meaningful net profit.
What is the difference between gross margin and markup?
Both measure profitability but from different reference points. Gross margin is calculated as profit divided by selling price (revenue-based). Markup is calculated as profit divided by cost (cost-based). A 50% markup corresponds to a 33.3% gross margin, so they are not interchangeable.
What is included in COGS?
COGS (Cost of Goods Sold) includes all direct costs to produce or acquire the products sold — raw materials, direct labor, manufacturing overhead, and freight-in. It excludes indirect costs like marketing, sales salaries, and administrative expenses, which are operating expenses.
How does profit margin affect pricing strategy?
Your target profit margin should inform your minimum selling price. If you know your COGS and desired margin, you can work backwards to find the required revenue. This calculator lets you set a margin target and solve for price, ensuring every product you sell contributes adequately to overhead and net profit.

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