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Pricing & profit / Profit Margin Calculator

Profit Margin Calculator

Gross profit, net profit and both margins for a month, quarter or year, from revenue, cost of goods and operating expenses.
$

Enter a number of at least 0

$

Enter a number of at least 0

What you paid for the products or materials you sold.

$

Enter a number of at least 0

Rent, wages, software, marketing and other running costs.

Net profit margin
16.0%
40.0%gross margin
$20,000.00gross profit
$8,000.00net profit
$0revenue $50,000.00
  • Cost of goods
  • Operating expenses
  • Net profit
Revenue$50,000.00
Cost of goods sold−$30,000.00
Gross profit · 40.0% margin$20,000.00
Operating expenses−$12,000.00
Net profit · 16.0% margin$8,000.00

You keep $16.00 of every $100 in sales after all costs.

See breakdown

How the profit margin calculation works

  1. Gross profit is revenue minus cost of goods

    $50,000 in sales minus $30,000 in goods sold leaves $20,000 gross profit.

  2. Gross margin divides that by revenue

    $20,000 ÷ $50,000 = 40%. It shows how much each sale leaves before overhead.

  3. Net profit also subtracts operating expenses

    Take away $12,000 of rent, wages and other costs and $8,000 is left.

  4. Net margin is net profit divided by revenue

    $8,000 ÷ $50,000 = 16%. This is the share of every sales dollar you keep.

Worked example. A shop sells $50,000 in a quarter. Goods cost $30,000 and operating expenses are $12,000. Gross profit is $20,000 (40% margin) and net profit is $8,000, a 16% net profit margin.

Profit Margin FAQ

What is the profit margin formula?

Profit margin = profit ÷ revenue × 100. Use gross profit for gross margin and net profit (after all expenses) for net margin.

What is the difference between gross and net profit margin?

Gross margin only subtracts the cost of goods sold. Net margin also subtracts operating expenses such as rent, wages and marketing, so it is always lower.

What is a good profit margin for retail?

For US listed retailers in January 2026, average gross margin was 33.2% and net margin 5.6% for general retail, and 26.3% gross and 1.3% net for grocery and food (NYU Stern, Damodaran). Small shops vary widely; compare with stores selling similar products.

What profit margin do restaurants make?

US listed restaurant companies averaged a 32.2% gross margin and a 9.4% net margin in January 2026 (NYU Stern, Damodaran). Those are large chains; independent restaurants, where food cost and labor take most of the revenue, usually keep less.

What is a good profit margin?

It depends on the industry. Across all US listed companies the January 2026 average was a 37.8% gross margin and a 9.7% net margin (NYU Stern, Damodaran). A net margin that covers your own pay and leaves money to reinvest is the practical test; compare with your industry rather than one number.

Can profit margin be negative?

Yes. If costs are higher than revenue the net profit is a loss and the margin is negative, for example −10%.

Sources: NYU Stern (Damodaran): Margins by sector, US, January 2026

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