What is Profit Margin?
Profit margin measures how much of each rupee/dollar of revenue becomes profit. It is one of the most important financial metrics for any business. There are three types: gross margin, operating margin, and net margin.
Profit Margin Formulas
- Gross Profit Margin = ((Revenue − COGS) / Revenue) × 100
- Net Profit Margin = (Net Profit / Revenue) × 100
- Markup % = ((Selling Price − Cost) / Cost) × 100
How to Use This Calculator for Profit Margin
Use Mode 1 (X% of Y): Enter your profit as the percentage and revenue as the value to find profit amount. Or use Mode 2 to find what percentage your profit is of revenue — that's your margin.
Typical Profit Margins by Industry
- Software/SaaS: 70–85% gross margin
- Retail: 20–40% gross margin
- Restaurant: 3–9% net margin
- E-commerce: 10–20% gross margin
- Consulting: 20–40% net margin
- Manufacturing: 5–10% net margin
Frequently Asked Questions
What is a good profit margin?
It depends on the industry. A net margin of 10% is generally considered good across most industries. Software companies often achieve 20–30%+ net margins.
What is the difference between margin and markup?
Margin is profit as a percentage of selling price. Markup is profit as a percentage of cost. A 25% markup equals a 20% margin.
How do I calculate gross profit margin?
Gross Profit Margin = ((Revenue − Cost of Goods Sold) / Revenue) × 100. Enter profit (Revenue − COGS) as X and Revenue as Y in Mode 2 above.
Why is profit margin important?
Profit margin tells you how efficiently a business converts revenue into profit. It helps compare performance across companies and industries.