Profit Margin Calculator

Enter your revenue, cost of goods sold (COGS), operating expenses, and other expenses. The calculator computes three key margins with visual progress bars and optional industry comparison.

Gross Margin = (Revenue − COGS) ÷ Revenue. This shows how efficiently you produce or source your products. A 60% gross margin means you keep $0.60 of every dollar after covering direct production costs.

Operating Margin = (Revenue − COGS − Operating Expenses) ÷ Revenue. This measures how efficiently you run the business day-to-day, including rent, salaries, marketing, and administration.

Net Margin = (Revenue − All Expenses) ÷ Revenue. The bottom line — what percentage of revenue you actually keep after every expense, including taxes, interest, and one-time costs.

The color-coded results show at a glance whether each margin is healthy (green), acceptable (yellow), or concerning (red). Select an industry to see how your margins compare against typical benchmarks.

Monthly financial review: Track your margins monthly to catch negative trends before they become crises. A margin declining over 2–3 months is a signal to investigate.

Pricing decisions: Before raising or lowering prices, model the impact on all three margins. A small price increase can significantly improve net margin.

Industry benchmarking: Select your industry to see how you compare. If your margins are below average, identify which cost categories are higher than they should be.

Investor preparation: Investors evaluate all three margins. Strong gross margin with weak net margin tells a different story than weak gross margin with strong cost control.

What COGS Includes

Cost of Goods Sold (COGS) represents the direct costs of producing your products or delivering your services. For a manufacturer, this includes raw materials, direct labor, and factory overhead. For a retailer, it's the wholesale cost of inventory. For a service business, it's the cost of billable labor and materials used to deliver the service. COGS does not include rent, marketing, or administration — those are operating expenses.

Why Each Margin Tells a Different Story

Gross margin reveals your pricing power and production efficiency. If it's declining, your costs are rising or your prices aren't keeping up. Operating margin shows whether your overhead is under control. A business can have great gross margin but poor operating margin if it's overspending on rent, staff, or marketing. Net margin is the true bottom line, factoring in taxes, loan interest, and everything else.

Industry Benchmarks

Margins vary dramatically by industry because of fundamentally different cost structures. Restaurants run 3–9% net margins because of high food waste, labor, and rent. Software companies achieve 70–85% gross margins because the marginal cost of serving another customer is nearly zero. Comparing your restaurant to a software company is meaningless — compare to other restaurants.

Improving Your Margins

Two fundamental paths: increase revenue without proportionally increasing costs (raise prices, upsell existing customers, improve your sales mix toward higher-margin products) or reduce costs without proportionally reducing revenue (negotiate better supplier rates, eliminate waste, automate manual processes). Price increases are often the most powerful lever because they flow straight to the bottom line.