Profit Margin Calculator

A profit margin calculator shows what percentage of your revenue is left as profit after subtracting costs. It's the single most useful number in business pricing because it tells you, at a glance, how much you actually keep from every dollar of sales — and how vulnerable you are to small cost increases or price cuts.

The version on this page calculates gross profit margin: revenue minus the direct cost of producing what you sold (COGS), divided by revenue. It also shows markup — profit as a percentage of cost — because the two are easy to confuse and that confusion routinely costs small businesses real money.

Suppose your boutique sold $100,000 of product last quarter. The wholesale cost of that product was $60,000:

• Gross profit: $100,000 − $60,000 = $40,000
• Profit margin: $40,000 / $100,000 = 40%
• Markup: $40,000 / $60,000 = 66.7%

A 40% gross margin is healthy for retail. But remember — this is before rent, payroll, marketing, and taxes. If those eat 30% of revenue, your net margin is only 10%, or $10,000 on $100,000 in sales.

• Setting prices — work backward from a target margin to find a selling price that actually clears overhead.
• Evaluating products — compare margin by SKU to find which items deserve more shelf space and which to drop.
• Negotiating with suppliers — see exactly how much margin recovery a 5% wholesale discount delivers.
• Pitching investors — gross margin is the first number investors look at to gauge unit economics.
• Discount decisions — a 20% off promotion on a 40% margin product cuts profit in half.

• Confusing margin with markup. A 50% markup is only a 33.3% margin. Many pricing errors come from applying a markup percentage where margin was intended.
• Forgetting variable costs. Shipping, payment processing fees (2.9%+), and returns all reduce real margin. Add them to COGS for an accurate number.
• Comparing gross margin across industries. A 30% margin is great for a grocery distributor but terrible for a SaaS company.
• Discounting without recalculating. Offering 25% off on a 40% margin item leaves you with just 20% margin — barely above breakeven on operations.
• Treating margin as static. Input costs, exchange rates, and product mix shift margin every quarter. Recalculate monthly, not yearly.