See the share of every sale you actually keep as profit.
What is profit margin?
Profit margin is the percentage of revenue you keep as profit after costs. It's one of the most important measures of business health — two companies with identical revenue can have wildly different margins, and the higher-margin one is almost always the stronger business.
Profit margin % = (Revenue − Cost) ÷ Revenue × 100
Sell something for $100 that cost $60, and your margin is (100 − 60) ÷ 100 = 40%. You keep 40 cents of every dollar of revenue.
Gross, operating, and net margin
"Profit margin" can mean several things depending on which costs you subtract:
- Gross margin — revenue minus cost of goods sold (what this calculator computes by default).
- Operating margin — also subtracts operating expenses like salaries and rent.
- Net margin — subtracts everything, including taxes and interest.
Enter different cost figures to compute whichever you need.
Margin vs markup
Margin is profit over revenue; markup is the same profit over cost. A 40% margin equals a ~67% markup. Keep them straight when pricing — and remember that your margin sets your break-even ROAS: the thinner the margin, the higher the return you need from every ad dollar.
Frequently asked questions
How do you calculate profit margin?
Subtract cost from revenue, divide by revenue, and multiply by 100. For example, $100 revenue with $60 cost gives a (100 − 60) ÷ 100 = 40% profit margin.
What is the difference between gross, operating, and net margin?
Gross margin subtracts only cost of goods sold; operating margin also subtracts operating expenses like wages and rent; net margin subtracts everything including taxes and interest. Each uses the same formula with a different cost figure.
What is the difference between margin and markup?
Margin is profit as a percentage of revenue; markup is profit as a percentage of cost. A 40% margin is the same profit as a roughly 67% markup. Use margin to judge profitability and markup to set prices from cost.
What is a good profit margin?
It depends entirely on the industry — software can run very high margins while grocery retail runs thin ones. Compare your margin to similar businesses, and track whether yours is improving over time.
What is the difference between gross and net profit margin?
Gross margin subtracts only direct product costs (COGS). Net margin subtracts all expenses including operating costs, taxes, and interest. This calculator computes gross margin by default — enter a higher "cost" figure if you want a rougher all-in view.
How does profit margin affect ROAS?
Thinner margins require a higher ROAS to break even. At a 25% gross margin you need 4x ROAS just to cover product costs plus ad spend; at 60% you only need about 1.67x. Margin is the hidden variable behind every ROAS target.