Profit Margin Calculator
Gross profit and margin from revenue and costs.
Input sheet
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Gross profit margin is the single fastest read on whether a business is making money on what it sells. It strips revenue down to what is left after the direct cost of delivering it, expressed as a percentage so you can compare a $50,000 month to a $5,000,000 year on equal footing.
How it works
Profit is revenue minus costs; margin is that profit as a percentage of revenue.
This calculator treats every dollar you enter under costs as a cost of the revenue, so the result is a gross-style margin. Keep the cost figure to direct costs (materials, labor, fulfillment) if you want a true gross margin; fold in overhead and you are closer to a net margin.
Because the result is a ratio, it is the right metric for tracking trends. A margin sliding from 28% to 22% over three months signals rising costs or discounting even while raw revenue still grows.
Gross profit = Revenue − Total costs, and Profit margin % = Gross profit ÷ Revenue × 100.
Worked examples
Revenue of $50,000 against total costs of $38,000. → $12,000 gross profit, a 24.0% margin.
Revenue minus costs is $12,000, and $12,000 ÷ $50,000 = 24%, so 24 cents of every sales dollar is profit before overhead.
A reseller turns $200,000 of revenue with $170,000 of costs. → $30,000 profit, a 15.0% margin.
Thin but typical for resale — $30,000 ÷ $200,000 = 15%, leaving little room for discounts or rising supplier prices.
Tips & gotchas
- Decide whether you want gross or net margin and be consistent — comparing a gross margin one month to a net margin the next will mislead you.
- A falling margin on rising revenue is a warning sign, not a win; growth funded by discounting can hollow out profit.
- Track margin per product line, not just company-wide — a healthy blended margin can hide a money-losing product.
- If costs exceed revenue the margin goes negative, which is the math telling you each sale loses money.
FAQ
What is the difference between gross and net margin?
Gross margin counts only the direct cost of producing or buying what you sell. Net margin also subtracts overhead, taxes, and interest, so it is always lower and reflects what the business actually keeps.
Can profit margin be over 100%?
No. Profit can never exceed revenue, so margin tops out below 100%. Markup, which divides by cost instead of revenue, can exceed 100%.
Why is my margin lower than my markup?
Margin divides profit by the larger number (revenue) while markup divides by cost, so for the same profit the margin is always the smaller percentage.
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