Profit Margin Calculator

How do you calculate profit margin?

Profit margin is profit divided by revenue, multiplied by 100. Profit is the amount left after subtracting the costs included in your calculation. At $1,000 revenue and $700 cost, profit is $300 and margin is 30%. The percentage tells you that 30 cents of each revenue dollar remain above that selected cost base.

The cost scope is part of the answer. Revenue minus direct product costs gives a different measure from revenue minus all business expenses. Label your result with the selected cost scope to distinguish product-level gross margin from business-wide income. Use revenue and costs from your records for the sale or period you want to compare.

How do you calculate gross profit and gross margin?

Gross profit = revenue − cost of sales. Gross margin = gross profit ÷ revenue × 100. Enter the sales revenue and corresponding direct costs for the same goods, job or period. At $800 revenue and $500 direct cost, gross profit is $300 and gross margin is 37.5%.

Choose Gross margin to compare revenue with the entered direct cost. The result shows both the remaining dollars and the percentage. Expand the calculation to see revenue less cost and profit divided by revenue. Keeping those two steps separate helps explain why an unchanged profit amount can represent a different percentage when sales revenue changes.

Which costs belong in a gross margin calculation?

The SEC's guide to financial statements describes gross profit as revenue less cost of sales, before operating expenses are deducted. Its distinction is useful here: expenses supporting the wider operation are different from costs directly linked to the goods or services sold.

For a job estimate, name the costs you include, such as purchased materials, outside specialists and labor allocated to the job. For a product, use a consistent acquisition or production cost. The result is a planning measure based on those named costs.

Keep a note alongside the result stating which costs are included. If the estimate leaves out delivery or your own work, the percentage still includes money needed for those costs. Use the separate shipping adjustment for delivery outside the entered direct cost. When a cost is already included, clear its separate adjustment before calculating so it is deducted only once.

How is gross margin different from net profit margin?

Gross margin stops after cost of sales. Net profit margin uses final net income after the other expenses included in the accounts. Those are different measures even when both are described informally as “profit margin.” A strong product-level margin can coexist with a loss after business-wide expenses.

To measure net margin, enter revenue and an already established net income for the same period. The calculator divides that income by revenue. For example, $30,000 revenue and $6,000 entered net income produce a 20% net margin.

Use established net income for this ratio. Equipment purchases, borrowing repayments and payment timing affect cash movement differently from income.

How do you find a selling price for a target margin?

Use selling price = cost ÷ (1 − target margin as a decimal). If the selected cost is $70 and the target margin is 30%, the price is $70 ÷ 0.70 = $100. That leaves $30, which is 30% of the sale.

A positive cost requires a target margin below 100%. As the target approaches 100%, the calculated price rises because less revenue remains to cover cost. For a $70 cost, a 50% target requires $140; a 90% target requires $700.

A target margin differs from adding the same percentage to cost; use the markup calculator for the full comparison and conversion table.

What is 30% margin on $100, and how does 70% work?

First decide whether $100 is the selling price or the cost. At a $100 selling price, 30% margin means $30 profit and $70 cost. If $100 is the cost, a 30% margin requires $100 ÷ 0.70 = $142.857142… before rounding. A displayed $142.86 selling price leaves $42.86 above the cost.

For a 70% margin, only 30% of revenue is available for the selected cost. A $30 cost therefore needs a $100 selling price. A $100 cost needs $333.333333… before rounding, displayed as $333.33.

Rounding can move the final margin slightly around the target. The target-price mode shows the unrounded calculation and the actual margin implied by the rounded price.

How do discounts and payment fees change your margin?

A discount lowers revenue while a fixed cost can stay unchanged. Suppose you planned to sell for $100 with a $60 direct cost. Profit is $40 and margin is 40%. A 10% discount reduces revenue to $90; profit becomes $30 and margin becomes 33.33%. A 10% discount cut margin by 6.67 points but cut profit by 25% ($40 → $30).

If the payment also costs $3, subtract that entered fee once to see $27 contribution and a 30% contribution margin on the discounted sale. Keep the original gross result and the after-fee result separately labeled.

Use the relevant Stripe, PayPal or Square fee calculator to estimate that fee. Paste the resulting dollar amount here. The fee calculator estimates processing, and this margin calculation uses the dollar fee you paste.

Which shipping and acquisition costs affect the result?

Include delivery in the defined cost view when it is part of fulfilling the sale you are measuring. A $10 shipping cost entered twice would reduce profit twice. A shipping charge collected from the buyer belongs in the revenue amount if the matching cost is also included in the comparison.

Customer acquisition spending needs a consistent scope. In Gross margin, you can enter an acquisition adjustment separately from direct cost. The result shows the amount remaining after that adjustment as contribution, alongside gross profit. Set an adjustment to zero when it is already included in the base to count that spending once.

Who uses the profit margin calculator?

Retailers and online sellers

Compare the same product and fulfillment scope across prices. A discount, shipping charge or return changes the dollars left per order. Keep the dollar contribution visible alongside the percentage; a positive percentage can still leave only a small amount to fund the store’s other spending.

A category benchmark is useful only beside a matching cost definition. Grocery sales and clothing sales have different purchasing and operating patterns. Compare your gross margin with the relevant gross-margin category, rather than comparing it with a whole-business net margin. The retail comparison in the FAQ identifies its survey year and gross-margin definition.

Contractors

Measure a defined job or stage using matching revenue and direct job costs. Distinguish an estimate from actual results. A cost overrun changes the margin even when the customer’s agreed price stays fixed. Keep original revenue while replacing the cost with the revised amount to examine that change.

Decide whether you are measuring a completed stage or the whole contract. Comparing the full contract price with only the materials bought so far would describe an incomplete cost base. For combining labor, purchases and an overhead allocation before choosing a selling price, use the pricing calculator.

Freelancers

State whether your own working time has an internal cost. Include that cost when measuring the amount left above the work required for the job. Record the hours and internal rate with the result so the percentage can be compared with another project using the same scope.

A client payment received today can relate to work performed in an earlier month. Matching the period keeps payment timing distinct from profitability. Keep the cost scope with any copied percentage to show what was measured.

Next step: turn your checked price into a quote

Compare the proposed revenue with the defined cost base before presenting the price. Keep assumptions about quantities, delivery hours and discounts with the estimate. If the margin falls below your chosen target, recalculate the price or adjust the proposed scope.

When the proposed price meets your chosen margin, add a job description and choose Turn into a quote. Free registration opens a new quote with the selling amount carried into a line item. Review the scope and customer details in the editor. Keep the cost base, margin and fee estimate with your internal calculation.

Choose Or make it without an account to prepare the offer in the free quote generator. Enter the selling amount and work included there. A quote template gives another document starting point. Keep quantities and delivery assumptions with the offer so a later scope change can be compared with the margin you checked.

Sources

The SEC’s Beginners’ Guide to Financial Statements explains cost of sales, gross profit and operating expenses. The Census Annual Retail Trade Survey: 2022 (benchmarked) supplies the historical retail comparison. Its report page is dated August 31, 2026. Sources checked October 13, 2026.