Gross profit margin
Gross Margin Calculator
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Gross margin = (Revenue − COGS) ÷ Revenue × 100
The share of revenue left after the direct cost of what you sell, your gross profit margin. It sets the ceiling on every other margin in the business.
Gross margin
58.0%
You keep 58.0% of revenue after cost of goods: $29,000 gross profit.
Gross profit$29,000
Markup on cost138%
Frequently asked questions
- What is gross profit margin?
- Gross profit margin is the share of revenue left after the direct cost of producing what you sell (cost of goods sold). At a 60% margin, 60 cents of every 1 in revenue is left to cover overhead, marketing and profit. It sets the ceiling on every margin below it.
- How do you calculate gross profit margin?
- Subtract cost of goods sold from revenue to get gross profit, then divide by revenue and multiply by 100: (revenue − COGS) ÷ revenue × 100. So 50,000 in revenue and 21,000 in cost of goods is 29,000 gross profit and a 58% margin.
- What is the difference between margin and markup?
- Both compare the same gross profit to a different base. Margin divides it by revenue (the selling price); markup divides it by cost. An item costing 21,000 and sold for 50,000 is a 58% margin but a 138% markup. Margin can never exceed 100%; markup can.
- What is the difference between gross and net profit margin?
- Gross margin counts only the direct cost of goods, so it measures how profitable the product is. Net margin is what is left after every other cost too: operating expenses, marketing, interest and tax. Gross margin is always the higher of the two and caps the net.
- What is a good gross profit margin?
- It varies widely by industry, so treat any benchmark as a convention, not a rule. Software often runs high margins because each extra sale costs little, while retail and manufacturing run lower. Judge it against your own trend and your competitors, not a universal threshold.