Profit Margin Calculator

Gross margin = (Revenue - COGS) / Revenue — shows profitability of your core product or service. Operating margin = (Revenue - COGS - Operating Expenses) / Revenue — shows profitability after running the business. Net margin = Net Profit / Revenue — shows what's left after all expenses, interest, and taxes. Each level tells a different story about your business health.

It varies widely by industry. Software companies often have gross margins above 70% and net margins of 15-25%. Retail typically operates on 2-5% net margins. Restaurants average 3-5% net margins. Compare your margins to industry benchmarks rather than across industries. Consistently improving your margins over time is more important than hitting any specific number.

Strategies include: increasing prices (if your market allows), reducing COGS through bulk purchasing or supplier negotiation, cutting unnecessary operating expenses, improving operational efficiency, focusing on higher-margin products or services, and reducing debt to lower interest expenses. Even small improvements compound — a 1% margin improvement on $1 million in revenue is $10,000 more profit.