Enter your revenue and cost of goods sold (COGS) to calculate gross profit margin. COGS = direct production/sourcing costs only (not rent, salaries, overhead).
Enter your figures and click Calculate
Your gross, operating, and net profit margins, markup, industry benchmark comparison, and pricing breakdown will appear here instantly.
Profit Margin Formulas — Gross, Operating & Net Explained
Margin and markup are the two most commonly confused business metrics. They measure profitability from different angles — and confusing them leads to costly pricing mistakes.
The Three Core Formulas
Margin vs Markup — The Key Difference
Markup is profit as a percentage of cost. Margin is profit as a percentage of revenue. They use the same numbers but calculate differently — which is why a "50% markup" ≠ a "50% margin."
Reverse Pricing Example: Hitting a 40% Gross Margin
Profit Margin Benchmarks by Industry (2026)
Margins vary dramatically by sector. A 10% net margin is excellent for a restaurant but mediocre for a SaaS company. Always benchmark against your industry, not a generic "good" number.
| Industry | Avg Gross Margin | Avg Operating Margin | Avg Net Margin | Notes |
|---|---|---|---|---|
| Software / SaaS | 70–80% | 15–25% | 10–23% | High margins from low incremental cost |
| Consulting / Professional Services | 60–80% | 20–35% | 15–30% | Labour-intensive; overhead varies widely |
| Fintech / Financial Services | 55–75% | 20–30% | 15–25% | Regulatory costs weigh on net margin |
| Healthcare | 40–65% | 8–18% | 4–12% | High overhead; billing complexity |
| E-Commerce / Online Retail | 30–50% | 5–15% | 2–8% | Ad spend and fulfilment compress margins |
| Manufacturing | 25–45% | 8–15% | 5–10% | Varies significantly by product type |
| Retail (Brick & Mortar) | 20–50% | 3–10% | 2–6% | Rent and staff are major cost drivers |
| Apparel / Fashion | 40–65% | 10–18% | 3–8% | Returns, markdowns reduce net margins |
| Construction | 15–25% | 5–10% | 2–8% | Labour & materials drive low gross margin |
| Restaurant / Food Service | 55–75% | 3–9% | 3–9% | High gross margin; thin net due to labour |
| Grocery / Supermarket | 20–30% | 1–3% | 1–2.5% | Volume-driven; razor-thin net margins |
| Wholesale / Distribution | 10–20% | 2–5% | 1–4% | Very thin; compete on volume and logistics |
| Real Estate (Agency) | 65–85% | 20–35% | 15–28% | Commissions drive high gross; low COGS |
| Auto / Car Dealership | 10–20% | 2–5% | 1–3% | New car margins are extremely thin |
| Freelance / Solopreneur | 70–95% | 30–60% | 25–55% | Near-zero COGS; very high potential margins |
Sources: NYU Stern Industry Data, IBISWorld 2025–26, Damodaran Online. Ranges reflect typical healthy businesses; outliers exist in all sectors.
Markup to Margin Conversion Table
The most common source of pricing errors: business owners set a "50% markup" thinking it gives them a 50% margin. It doesn't. Here's the exact relationship.
| Markup % | Gross Margin % | Example Cost $100 | Selling Price | Profit |
|---|---|---|---|---|
| 10% | 9.09% | $100 | $110 | $10 |
| 20% | 16.67% | $100 | $120 | $20 |
| 25% | 20.00% | $100 | $125 | $25 |
| 33.3% | 25.00% | $100 | $133 | $33 |
| 50% | 33.33% | $100 | $150 | $50 |
| 75% | 42.86% | $100 | $175 | $75 |
| 100% | 50.00% | $100 | $200 | $100 |
| 150% | 60.00% | $100 | $250 | $150 |
| 200% | 66.67% | $100 | $300 | $200 |
| 300% | 75.00% | $100 | $400 | $300 |
| 400% | 80.00% | $100 | $500 | $400 |
Reverse Pricing Table — Selling Price for a Target Margin
| Target Margin | Selling Price Formula | Cost $50 → Price | Cost $100 → Price | Cost $500 → Price |
|---|---|---|---|---|
| 10% | Cost ÷ 0.90 | $55.56 | $111.11 | $555.56 |
| 20% | Cost ÷ 0.80 | $62.50 | $125.00 | $625.00 |
| 25% | Cost ÷ 0.75 | $66.67 | $133.33 | $666.67 |
| 30% | Cost ÷ 0.70 | $71.43 | $142.86 | $714.29 |
| 40% | Cost ÷ 0.60 | $83.33 | $166.67 | $833.33 |
| 50% | Cost ÷ 0.50 | $100.00 | $200.00 | $1,000.00 |
| 60% | Cost ÷ 0.40 | $125.00 | $250.00 | $1,250.00 |
| 70% | Cost ÷ 0.30 | $166.67 | $333.33 | $1,666.67 |
Profit Margin Calculator — Frequently Asked Questions
Everything you need to know about calculating and improving profit margins, including the margin vs markup distinction, industry benchmarks, and pricing formulas.