This profit margin calculator turns revenue and cost lines into the three margins businesses run on — gross, operating and net — and shows markup beside them so the two never get confused again.

Gross profit & margin –
Operating profit & margin –
Net profit & margin –
Markup on COGS (for comparison) –

Three Margins, Three Different Questions

Pricing from cost upward is our Markup Calculator; the volume needed to cover costs is the Break-Even Calculator. Part of our Finance Calculators collection.

Worked Example (Verified)

  • Revenue $250k, COGS $150k, opex $60k, interest/taxes $10k (defaults): gross $100k = 40% margin · operating $40k = 16% · net $30k = 12% — and the gross MARKUP is 66.7%, the number that causes a thousand pricing-meeting arguments
  • Reading the staircase: gross margin judges the product, operating margin judges the business model, net margin judges the capital structure and tax position — each step down assigns the blame more precisely
  • Benchmarks differ wildly by industry (software gross ~80%, grocery net ~2%) — margins are meaningful against your own sector and your own trend, not the internet’s average

Margin Discipline

  • Margin ÷ revenue; markup ÷ cost. Convert: margin = markup/(1 + markup); markup = margin/(1 − margin). A 50% markup is a 33.3% margin — forever.
  • Price rises flow ~purely to gross margin; cost rises eat it. Sensitivity: at 40% margin, a 5% price rise (volume held) lifts margin to ~42.9%.
  • Watch the net-to-gross leak: interest and taxes live below operating — highly leveraged firms show fine operating margins and anemic net ones.
  • Negative margins are information, not rounding errors: price, mix or COGS is structurally wrong somewhere.

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Frequently Asked Questions

How do you calculate profit margin?

Margin = profit ÷ revenue × 100. Gross margin uses revenue − COGS; operating subtracts operating expenses too; net subtracts everything including interest and taxes. Defaults: $100k/$250k = 40% gross, 16% operating, 12% net. This calculator produces all three tiers at once.

What’s the difference between margin and markup?

The denominator. Margin divides profit by selling price (revenue); markup divides by cost. $100k profit on $150k cost is 66.7% markup but only 40% margin ($100k on $250k revenue). Markup ≥ margin always (same dollars, smaller base) — mixing them up overstates profitability in every pitch deck ever made.

What is a good profit margin?

Industry-relative: software net margins of 20–30% are common; supermarkets run 1–3% net and thrive on volume; restaurants sit ~3–9%. “Good” means healthy for your sector and stable-to-rising over time — the trend matters more than any absolute threshold.

How do I convert markup to margin?

Margin = markup ÷ (1 + markup). 66.7% markup → 0.667/1.667 = 40% margin. Reverse: markup = margin ÷ (1 − margin). A 50% margin requires a 100% markup — double the cost.

Why do my margins fall as revenue grows?

Usual suspects: discounting to win volume (price/mix erosion in gross margin), step-fixed costs arriving in chunks (opex), and debt service scaling with expansion (below operating). The tier where the fall happens names the cause — compute all three and compare periods.

Is this profit margin calculator free?

Yes — free, instant, no sign-up.