Profit Margin Calculator

Why Profit Margin Matters

Profit margin is the most important metric for assessing business health. It shows what percentage of revenue becomes profit after accounting for costs. Tracking margins helps you price products effectively, control expenses, and grow sustainably.

How to Use This Calculator

• Revenue: Total income from sales before any expenses
• Costs: All expenses including production, labor, overhead, etc.
• Click "Calculate" to see your gross profit, margin percentage, and markup

Formulas Used

Example: $10,000 revenue - $6,500 costs = $3,500 gross profit
Profit Margin = ($3,500 ÷ $10,000) × 100 = 35%
Markup = ($3,500 ÷ $6,500) × 100 = 53.85%

Profit Margin vs. Markup

While related, these metrics serve different purposes:

• Profit Margin shows profitability as percentage of revenue (what you keep)
• Markup shows how much you add to costs to set prices (what you charge)
• A 50% markup equals a 33% margin (on $100 cost: $150 price → $50 profit is 33% of $150)

Industry Benchmarks (Average Gross Margins)

Tips to Improve Profit Margins

• ✅ Increase prices strategically — test small increases first
• ✅ Reduce variable costs — negotiate with suppliers, find efficiencies
• ✅ Optimize product mix — focus on higher-margin items
• ✅ Increase sales volume — spread fixed costs over more units
• ✅ Reduce overhead — automate processes, eliminate waste

Advanced Margin Analysis

For deeper financial insights:

• Net Profit Margin: (Revenue - All expenses) ÷ Revenue
• Operating Margin: (Operating income ÷ Revenue)
• Contribution Margin: (Revenue - Variable costs) ÷ Revenue
• Break-even Analysis: Fixed costs ÷ (Price - Variable cost per unit)