Free Profit Margin Calculator
Calculate gross profit margin, operating profit margin, and net profit margin using revenue and business expenses.
You can also calculate the selling price required for a target margin or determine the maximum cost allowed by your target.
Amounts are in US dollars. Use figures from the same accounting period or the same sale. Exclude sales tax collected on behalf of tax authorities.
Your Profit Margin Results
Your calculation details will appear here.
Enter values and click Calculate.
The calculator estimates profit based on entered expenses and a simplified income tax calculation. Actual financial statement classifications and income tax liabilities may differ.
How to Use the Profit Margin Calculator
The calculator helps business owners, retailers, freelancers, and service providers measure profitability using sales revenue and business expenses.
Step 1: Select a Calculation Mode
Choose Calculate Profit and Profit Margins to evaluate existing revenue and costs.
Choose Selling Price for a Target Margin to calculate the minimum revenue needed to achieve a desired profit margin.
Choose Maximum Cost to determine the maximum cost of goods sold allowed by a specified revenue and target margin.
Step 2: Enter Revenue and Costs
Enter total revenue and cost of goods sold. Use the same accounting period for all values.
For a single product, enter the selling price and cost per unit instead.
Step 3: Add Business Expenses
Include operating expenses, payment fees, interest, and other non-operating expenses.
Enter an estimated income tax rate if you want an after-tax profit estimate.
Step 4: Calculate
Click Calculate to view gross profit, operating profit, net profit, and their corresponding margins.
Try an Example loads sample values. Reset restores the calculator defaults.
Profit Margin Formulas
Profit margin measures how much of a business’s revenue remains as profit after particular costs.
1. Gross Profit Formula
Gross Profit = Revenue – Cost of Goods Sold
For example, $10,000 in revenue and $6,000 in COGS produce $4,000 in gross profit.
2. Gross Profit Margin Formula
Gross Margin (%) = Gross Profit ÷ Revenue × 100
Using the previous example:
$4,000 ÷ $10,000 × 100 = 40%
3. Operating Profit Formula
Operating Profit = Gross Profit – Operating Expenses – Payment Fees
This calculator treats payment processing fees as operating expenses and displays them separately.
4. Operating Profit Margin
Operating Margin (%) = Operating Profit ÷ Revenue × 100
Operating margin measures profitability after the operating expenses included in the calculation.
5. Net Profit Formula
Net Profit = Operating Profit – Interest – Other Non-Operating Expenses – Estimated Income Tax
The calculator applies the entered income tax rate to positive pretax profit only.
It does not calculate tax loss carryforwards, credits, deferred taxes, or other complex tax adjustments.
6. Net Profit Margin Formula
Net Profit Margin (%) = Net Profit ÷ Revenue × 100
Net margin accounts for the business expenses and estimated income tax included in the calculation.
7. Markup Formula
Markup (%) = Gross Profit ÷ Cost of Goods Sold × 100
Markup and margin use different denominators. Markup divides by cost, while margin divides by revenue.
8. Target Gross Margin Formula
Required Revenue = COGS ÷ (1 – Target Gross Margin)
Convert the margin percentage to a decimal before calculating.
9. Target Operating Margin Formula
Required Revenue = (COGS + Operating Expenses + Fixed Fees) ÷ (1 – Target Margin – Processing Fee Rate)
The denominator must be positive.
10. Target Net Margin Formula
For the simplified income tax model used by this calculator:
Required Revenue = (COGS + Operating Expenses + Fixed Fees + Interest + Other Expenses) ÷ [1 – Processing Fee Rate – Target Net Margin ÷ (1 – Tax Rate)]
This formula assumes positive pretax profit at the calculated target.
The calculator rounds required revenue up to the nearest cent.
Profit Margin Calculation Example
Suppose a business reports the following financial information:
- Total revenue: $10,000
- Cost of goods sold: $6,000
- Operating expenses: $1,500
- Payment fees: $200
- Interest expense: $100
- Estimated income tax rate: 25%
Step 1: Calculate Gross Profit
$10,000 – $6,000 = $4,000
Step 2: Calculate Gross Margin
$4,000 ÷ $10,000 × 100 = 40%
Step 3: Calculate Operating Profit
$4,000 – $1,500 – $200 = $2,300
Operating margin:
$2,300 ÷ $10,000 × 100 = 23%
Step 4: Calculate Pretax Profit
$2,300 – $100 = $2,200
Step 5: Calculate Estimated Income Tax
$2,200 × 25% = $550
Step 6: Calculate Net Profit
$2,200 – $550 = $1,650
Final Net Profit Margin
$1,650 ÷ $10,000 × 100 = 16.50%
The business earns an estimated $0.165 in net profit for every $1 of revenue under these assumptions.
Profit Margin Comparison Table
The following examples assume $100 in cost of goods sold, with no additional expenses.
| Selling Price | Gross Profit | Gross Margin | Markup |
|---|---|---|---|
| $120 | $20 | 16.67% | 20% |
| $125 | $25 | 20% | 25% |
| $150 | $50 | 33.33% | 50% |
| $175 | $75 | 42.86% | 75% |
| $200 | $100 | 50% | 100% |
Gross margin and markup are different. A 50% markup on $100 cost produces a selling price of $150, but the gross margin is only 33.33%.
Frequently Asked Questions
What is profit margin?
Profit margin measures the percentage of revenue remaining after particular expenses are deducted.
Gross, operating, and net profit margins include different categories of expenses.
How do I calculate profit margin?
Subtract the relevant expenses from revenue to calculate profit.
Divide profit by revenue and multiply by 100.
What is a good profit margin?
An appropriate margin depends on industry, business model, cost structure, and financial objectives.
Compare margins using consistent accounting definitions and relevant business or industry data.
What is the difference between gross and net profit margin?
Gross margin subtracts cost of goods sold from revenue.
Net margin also accounts for additional expenses and income taxes.
Is a 30% profit margin the same as a 30% markup?
No. A 30% margin means profit equals 30% of selling price.
A 30% markup means profit equals 30% of cost.
Can profit margin be negative?
Yes. A negative profit margin means the relevant expenses exceed revenue.
The calculator displays negative profit and margin values.
What happens if revenue is zero?
Profit can still be calculated after subtracting expenses.
However, profit margin is undefined because revenue is the denominator.
How do I calculate a target profit margin?
Choose the target selling price mode, enter your costs, and select the desired margin percentage.
The calculator determines the required revenue under your selected margin definition and expense assumptions.
Does this calculator include income tax?
Yes. Enter an estimated income tax rate to calculate a simplified after-tax profit.
Actual tax liabilities may differ because of deductions, credits, losses, and other tax rules.
Can I calculate the maximum cost for a target margin?
Yes. Select Maximum Cost for a Target Margin.
Enter revenue, choose the margin type, and specify the target percentage.
The calculator determines the maximum COGS allowed by those assumptions.
Related Calculators
Educational business estimates only. Verify expenses, accounting classifications, and actual taxes against your records.