Profit Margin Calculator
Revenue is vanity, margins are sanity. Enter revenue and cost lines to compute gross, operating, and net margins — the three lenses investors and owners use to read a business.
Your results
Charts & visualization
Revenue → costs → profit
Watch revenue shrink through COGS and OpEx until only net profit remains.
Every chart’s underlying numbers are available as text — use the “view as table” control under each chart.
How it works
Margins cascade down the income statement:
- Gross margin — (revenue − COGS) ÷ revenue. Measures production efficiency and pricing power.
- Operating margin — subtracts overhead. Shows whether the core business runs profitably.
- Net margin — after interest and taxes, the final take-home share.
Diagnostics follow naturally: strong gross margin with weak operating margin points at overhead bloat; weak gross margin points at pricing or supplier problems.
Formula used
COGS— direct cost of producing goods or servicesOpEx— indirect operating overheadNet profit— after interest and taxes as well
Example calculation
This business earns 56.00% gross margin — healthy for product businesses. Overhead pulls operating margin to 22.00%, and after interest plus taxes the net margin settles at 15.00%: about $37,500 kept from every sales dollar. A 5% price increase with unchanged costs would flow almost entirely to net margin — that is pricing leverage.
Assumptions & limitations
- Single-period snapshot; trends matter more than one reading.
- Accrual accounting assumed — recognize revenue when earned.
- Owner compensation choices distort comparisons; normalize before benchmarking.
- Industry norms differ enormously — grocery margins near 2% coexist with software above 20%.
Results are planning estimates based on your inputs and the stated assumptions — not financial advice or a loan offer. Verify important figures with your lender or advisor.
Frequently asked questions
What is a good profit margin?
It depends entirely on industry: supermarkets run low single digits; software companies often exceed 20% net. Compare against your own history and direct competitors rather than universal targets.
How do I improve my margins?
Four levers: raise prices, cut COGS (suppliers, waste), trim overhead, or shift mix toward higher-margin offerings. Pricing changes usually move margins fastest.
What is the difference between markup and margin?
Markup is profit ÷ cost; margin is profit ÷ price. A 50% markup equals only a 33% margin. Confusing them silently underprices many small businesses.
Why does my net margin differ from my bank balance?
Timing (receivables, inventory), loan principal payments, owner draws, and equipment purchases all move cash without touching margin. Margins measure profitability; cash flow measures survival.