Business Calculator
Profit Margin Calculator
Estimate gross profit, gross profit margin, operating profit, and operating profit margin from revenue, cost of goods sold, and operating expenses. Interest, income taxes, and any other costs you do not enter are excluded.
Revenue and Costs
Enter your total sales revenue and the costs associated with generating that revenue.
What These Results Mean
Gross profit is revenue minus the direct cost of goods sold.
Gross profit margin shows the percentage of revenue remaining after direct costs are deducted.
Operating profit subtracts both direct costs and the operating expenses you enter from revenue. It excludes interest, income taxes, and any other costs not entered.
Operating profit margin shows how much of each revenue dollar remains after those entered costs.
Profit Margin Formula
Gross Profit = Revenue − Cost of Goods Sold
Gross Profit Margin = Gross Profit ÷ Revenue × 100
Operating Profit = Revenue − Cost of Goods Sold − Operating Expenses
Operating Profit Margin = Operating Profit ÷ Revenue × 100
How to Use the Profit Margin Calculator
Start by entering your total business revenue for the period you want to analyze.
Next, enter your cost of goods sold. This should include the direct costs associated with producing or purchasing the products or services you sell.
Then enter operating expenses such as rent, payroll, insurance, software, marketing, utilities, and other overhead expenses.
The calculator will estimate gross profit, gross profit margin, operating profit, and operating profit margin. It will also show what percentage of revenue is being used for direct costs and operating expenses. Interest, income taxes, and any other costs you do not enter stay outside the result.
You can change the values to compare different pricing, cost, expense, and revenue scenarios.
Profit Margin Example
Suppose a business generates $25,000 in revenue, has $12,000 in cost of goods sold, and has $5,000 in operating expenses.
Gross profit would be $13,000, which produces a gross profit margin of 52%.
After subtracting the $5,000 in operating expenses, operating profit would be $8,000. That produces an operating profit margin of 32%. Interest and income taxes are not included.
In this example, 48% of revenue is being used for cost of goods sold and 20% is being used for operating expenses.
Frequently Asked Questions
What is profit margin?
Profit margin measures how much profit remains from revenue after certain business costs are deducted. It is usually expressed as a percentage of revenue.
What is gross profit margin?
Gross profit margin shows the percentage of revenue remaining after subtracting the direct cost of goods sold. It does not include operating expenses such as rent, payroll, insurance, and marketing.
What is operating profit margin?
Operating profit margin shows the percentage of revenue remaining after subtracting cost of goods sold and the operating expenses you enter. It excludes interest, income taxes, and any other costs not entered.
How is operating profit different from net profit?
Net profit also subtracts interest, income taxes, and other costs this calculator does not estimate. Understanding Business Profit Margins explains how gross, operating, and net margins differ.
What should I include in cost of goods sold?
Cost of goods sold generally includes direct costs tied to producing or purchasing what your business sells. Examples may include materials, wholesale inventory, manufacturing costs, and certain direct labor costs.
What is a good profit margin?
There is no single profit margin that is considered good for every business. Margins vary by industry, pricing strategy, business model, overhead, competition, and growth stage. It is usually more useful to compare your margin with your own historical performance and similar businesses in your industry.
Can a business have a positive gross margin but lose money?
Yes. A business can earn a positive gross profit and still have an operating loss when the operating expenses entered are greater than that gross profit. Interest and income taxes are separate and are not part of this result.
Related Business Calculators
Use these additional BizToolLab calculators to analyze costs, break-even requirements, business profitability, and investment returns.
Read Understanding Business Profit Margins for how gross, operating, and net margins differ.