Profit Margin Calculator: Gross and Net Margin
Margins show how much of every rupee of sales you keep. Enter your revenue, cost of goods sold and, optionally, operating expenses to see gross margin and net margin.
Estimates for general information. This is not tax or accounting advice.
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From related categoriesHow to use this calculator
- Enter total sales revenue for the period.
- Enter the direct cost of the goods you sold.
- Optionally enter operating expenses.
- Read gross margin, gross profit, net profit and net margin.
The formula
Worked example
Revenue ₹5,00,000, COGS ₹3,20,000, operating expenses ₹90,000: gross profit is ₹1,80,000 (36% gross margin). Net profit is ₹90,000, an 18% net margin.
Understanding your result
Gross margin tells you whether your pricing covers the product. Net margin tells you whether the whole business is profitable after running costs. A healthy margin depends heavily on the industry, so compare with similar businesses.
When to use it
- Review monthly or yearly performance.
- Compare product lines or shops.
- Check whether price changes are protecting your margin.
In-depth guide
Margin and markup are not the same
Margin is profit as a share of the selling price. Markup is profit as a share of the cost. A 50% markup on cost gives only a 33.3% margin. The table shows the markup you need for each margin on a cost of ₹100.
| Target margin | Selling price on ₹100 cost | Markup needed |
|---|---|---|
| 10% | ₹111 | 11.1% |
| 20% | ₹125 | 25.0% |
| 30% | ₹143 | 42.9% |
| 40% | ₹167 | 66.7% |
| 50% | ₹200 | 100.0% |
Gross margin and net margin
Gross margin looks only at the direct cost of what you sell. Net margin also takes off rent, salaries, marketing and other running costs. A business can have a healthy gross margin and a thin net margin if its running costs are high. The example on this page shows 36% gross and 18% net on the same sales.
What counts as a good margin
There is no single number. Margins differ widely by trade: a service business may keep a high margin, while a trading business with large volume may work on a low one. Compare your margin with your own past figures and with similar businesses, and watch the trend over time.
Ways to improve your margin
- Negotiate better prices with suppliers or buy in larger lots.
- Raise prices on items where customers are not price sensitive.
- Reduce waste and returns.
- Drop items that sell slowly and tie up cash.
- Control fixed costs so growth in sales lifts the net margin.
Limits
The calculator uses the figures you enter for one period. Tax, interest and depreciation are not included unless you add them to expenses. Use the same period for revenue, cost and expenses.
Assumptions and limits
Does not include tax, interest or depreciation unless you add them to expenses. Use the same period for all inputs.
Frequently asked questions
What is a good profit margin?
It varies by industry. Trading often has lower margins than services, so compare like with like.
Is margin the same as markup?
No. Margin is based on the selling price, markup on cost. Use the markup calculator for markup.
What counts as COGS?
The direct cost of buying or making what you sold, such as purchase cost and inward freight.
Can margin be negative?
Yes, if costs exceed revenue.
Should I enter amounts with GST?
Use amounts without GST for revenue and costs.