See your gross, operating, and net margin on any sale — and what price you need to charge to hit the margin you actually want.
Use this free profit margin calculator to figure out whether a product is paying you enough, what to mark it up to, and how the three different margin types stack up against industry benchmarks.
Direct answers to the most common questions, in plain language. Skim if you're in a hurry; dig deeper below.
How much of every dollar you keep as profit.
Profit margin is profit divided by revenue, expressed as a percentage. A 30% margin means that for every $100 in sales, you keep $30 after the relevant costs. The three flavours — gross, operating, net — just differ in which costs are subtracted.
Depends on the industry, but roughly: 5–10% net is typical, 20%+ is excellent.
Software businesses regularly hit 70%+ gross and 20%+ net. Retail and restaurants run on much thinner margins — single-digit net is normal. The honest answer is: good means better than your industry's median, not a universal number.
Same dollars, different denominator. Margin uses price; markup uses cost.
A $40 profit on a $100 price is a 40% margin and a 67% markup. Both describe the same transaction but answer different questions: margin is about how profitable you are; markup is about how much you added to the cost.
All three. They tell you different things.
Gross margin tells you whether the product itself works. Operating margin tells you whether the business works at scale. Net margin tells you what's left after taxes and financing. A healthy business needs all three to be defensible — not just the first.
The mechanics in short answers — no jargon, no upsell.
Revenue minus the cost of making or buying the thing, divided by revenue. It tells you whether the product itself can carry a business — before any rent, salaries, or marketing.
Take gross profit and subtract operating expenses — rent, payroll, software, marketing. Divide by revenue. This is the margin that tells you whether the business as a whole is profitable.
The bottom line. Operating profit minus taxes and any interest on debt, divided by revenue. It's what actually shows up in your bank account at year-end.
If a $60 cost sells for $100, the margin is 40% (40 ÷ 100) and the markup is 67% (40 ÷ 60). The calculator shows both so you can use whichever your industry speaks.
Designed so anyone can model their situation in under a minute, with or without a finance background.
Stop guessing. Decide the margin you want, and the calculator backs out the price that gets you there.
A product can look healthy on top-line revenue and lose money once you include OpEx. The three-tier margin view exposes that fast.
Run a low-price, high-volume scenario against a premium one. See which actually puts more money in your pocket.
Know the margin impact of a 5% cost reduction before you walk into the meeting.
Some industries quote margin, others quote markup. The calculator shows both so you're never the one in the room confused.
The gross → operating → net structure mirrors how a real income statement reads. Practice on a product, scale up to the business.
Everything you might ask before, during, or after using this tool.
Both, in different ways. Gross margin tells you whether the product itself is viable — if it's too thin, no amount of scale will save you. Net margin tells you whether the business overall is making money after every cost. A 70% gross margin with a negative net margin (very common in early-stage SaaS) means the product works but the business doesn't yet.
Industry-dependent. Software: 15–25%+. Manufacturing: 5–10%. Retail: 2–5%. Restaurants: 3–9%. Professional services: 10–20%. Banking and real estate vary wildly. The right question isn't "what's a good number" but "am I above or below my industry's median?"
If you're paying yourself a market-rate salary, yes. If you're running lean and not paying yourself, the margin you see is misleadingly high — you'd need to subtract a reasonable owner's compensation to get a real picture. Most acquirers will normalise this anyway when valuing the business.
A few signals. Your gross margin is below your industry's median. You can't comfortably absorb a 10% cost increase. You're working full-time and the net margin doesn't replace what you'd earn at a job. Any one of these and your price is probably too low.
Markup can — easily, in retail and luxury. Margin cannot, because margin is profit divided by selling price, and profit can never be larger than the selling price itself. A 90% margin is exceptional; anything claiming "200% margin" is using the word wrong (they mean markup).
For physical products, yes — inbound shipping and packaging are part of the direct cost. Outbound shipping (to customers) is technically COGS too if you're absorbing it, or revenue if you're charging for it. The cleanest practice: include everything that scales per unit in COGS.
Brutally. A 20% discount on a 40% margin product cuts your margin to 25%. A 30% discount kills it almost entirely. The calculator shows the gap clearly — model your discounted price and watch the margin column shrink before you commit to a sale.
Contribution margin is revenue minus all variable costs, including variable OpEx like sales commissions. Gross margin is revenue minus COGS only. For pricing decisions, contribution margin is often more useful; for reporting, gross margin is the standard. Most small businesses use the two interchangeably and get away with it.
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These two get confused constantly, and the confusion costs real money.
Margin is profit as a percentage of selling price. Markup is profit as a percentage of cost. The same transaction can be described either way and the percentages will always differ — markup is always larger because the denominator (cost) is smaller than the price.
The translation that helps most: a 50% margin equals a 100% markup. A 33% margin equals a 50% markup. A 25% margin equals a 33% markup. If your supplier quotes markup and you quote margin (or vice versa), you'll talk past each other every time.
Operationally: use markup when you're setting a price from a cost, because the formula is cleaner. Use margin when you're reporting profitability, because it's what investors and bookkeepers expect to see.
Gross margin can flatter you. Net margin can scare you. Operating margin sits in between and is the most useful number for actually running the business.
Gross margin only looks at the unit economics. It tells you whether the product can carry overhead — but it ignores rent, salaries, marketing, and everything else. A 90% gross margin SaaS company can still bleed cash if the OpEx is heavy.
Operating margin includes the cost of running the business but excludes taxes and financing. This is the cleanest measure of operational performance — it's what acquirers focus on, and it's what tells you whether your business model works at the current scale.
Net margin is what reaches the owners. It's what investors care about, but it can be distorted by one-time tax events, non-recurring charges, or financing decisions that don't reflect the underlying business.
The three together form a ladder. If gross is healthy but operating is weak, your overhead is too high. If operating is healthy but net is weak, taxes or debt are eating you. Read them as a sequence.
The honest answer: "good" is industry-relative, and the headline number matters less than the trend.
Software companies routinely sustain 70–90% gross margins because copies of code are nearly free to produce. That's not because they're better businesses than restaurants — it's because the cost structure is different. A 5% net margin in retail might be exceptional; a 5% net margin in SaaS would be a disaster.
What actually matters: is your margin above or below your industry's median, and is it trending up or down. A business with 8% net margin growing 2 points a year is in better shape than one with 15% net margin shrinking by 1 point.
If you must benchmark in absolute terms: 5–10% net margin is the broad middle for most businesses, 10–20% is good, 20%+ is excellent for anything outside software.
Discounts feel like a small concession on price. They are a large concession on profit.
Take a product with a 40% gross margin — say, $60 cost and $100 price. Offer a 20% discount and the new price is $80. The cost is still $60. The new gross margin is 25%. You haven't lost 20% of your profit; you've lost almost 40% of it.
This is why retailers spend so much energy framing discounts as "limited time" or "members only" — they need volume increases big enough to offset the margin damage, and that's rarely the case.
Before any discount, run the post-discount margin through the calculator. If the discounted margin is below your floor, the only way the math works is if the volume increase is dramatic — which most discounts don't actually produce.
Two short notes worth reading before you trust any number on this page.
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