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What is profit margin?
Profit margin is the percentage of revenue that remains as profit after subtracting costs. It is one of the most important indicators of business health — showing how efficiently a company turns revenue into actual profit. A business with $10,000 in revenue and $6,000 in costs has a 40% gross profit margin, meaning it keeps $0.40 of every dollar earned.
There are two main types: gross profit margin (revenue minus cost of goods sold) and net profit margin (revenue minus all expenses including operating costs and taxes).
Margin and markup are often confused. A product that costs $25 and sells for $40 has a 37.5% markup but a 37.5% gross margin — wait, that is not right. The markup is ($40 − $25) / $25 = 60%, while the gross margin is ($40 − $25) / $40 = 37.5%. Always be clear which metric you are reporting.
How to use this calculator
Standard mode. Enter your total revenue and your cost of goods sold — the direct costs to produce or deliver your product or service. The profit margin calculator instantly shows your gross margin, markup percentage, and how your numbers compare to industry benchmarks. For example, $10,000 revenue with $5,750 in COGS gives a 42.5% gross margin — comfortably above the retail average.
Reverse mode. Know your cost and need to hit a specific margin? Enter your COGS and target margin percentage — the calculator finds the exact selling price to charge. A product that costs $25 with a 40% target margin requires a price of $41.67 (COGS / (1 − 0.40)). Optionally add a platform fee (e.g., Etsy 6.5%, Amazon FBA ~30%) to see your net margin after fees.
Quantity field. Enter the number of units to project total gross profit for a batch, a month, or a full product run — useful when negotiating supplier pricing or planning inventory.
To find the revenue volume you need to cover all your costs at this margin, pair this tool with the Break-Even Calculator.