Free Profit Margin Calculator
Revenue is vanity, profit is sanity. This free profit margin calculator turns three numbers — revenue, cost of goods sold, and operating expenses — into the margins that actually tell you whether your business works: gross margin, operating margin, and the markup you are charging on cost. It also solves the question every owner eventually asks: what price do I need to charge to hit a target margin?
It runs entirely in your browser, requires no sign-up, and nothing you type leaves your device.
Gross, Operating and Net Margin
Businesses have several margins, and they answer different questions. Each one strips away another layer of cost.
- Gross margin = (Revenue − COGS) ÷ Revenue. It measures how profitable the thing you sell is, before any overhead. A weak gross margin is a pricing or sourcing problem, and no amount of cost-cutting elsewhere will fix it.
- Operating margin = (Revenue − COGS − Operating expenses) ÷ Revenue. It measures whether the whole operation — rent, salaries, software, marketing — pays for itself.
- Net margin goes one step further and subtracts interest, taxes and one-off items. This calculator stops at operating margin, which is the number you can actually control month to month.
Markup Is Not Margin
This is the single most expensive misunderstanding in small business pricing. Margin is a share of revenue. Markup is a share of cost. They are always different numbers, and markup is always the larger one.
Buy an item for $50 and sell it for $75. Your markup is 50% ($25 ÷ $50 cost). Your margin is only 33.3% ($25 ÷ $75 revenue). An owner who wants a 40% margin and applies a 40% markup will land at a 28.6% margin and quietly under-earn on every sale.
To convert: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). The calculator shows both figures side by side so you never confuse them again.
A Worked Example
Take a business with $250,000 of revenue, $150,000 of cost of goods sold, and $60,000 of operating expenses.
- Gross profit: $250,000 − $150,000 = $100,000, a 40% gross margin.
- Operating profit: $100,000 − $60,000 = $40,000, a 16% operating margin.
- Markup on cost: $100,000 ÷ $150,000 = 66.7% — far higher than the 40% margin, as always.
COGS eats 60% of every revenue dollar and overhead another 24%, leaving 16 cents of operating profit. Push gross margin up five points and operating profit jumps by more than 30% — which is why pricing usually beats penny-pinching.
Pricing for a Target Margin
Most owners price forwards: take the cost, add something, hope. Price backwards instead. If you know your unit cost and the margin you need, the price falls out of one formula: price = cost ÷ (1 − margin).
A $25 unit cost at a 40% target margin needs a price of $41.67 — which is a 66.7% markup on cost. Notice you can never reach a 100% margin: as the target approaches 100%, the required price runs off to infinity, because margin is a share of a price that keeps growing.
Pair this with the break-even calculator to check how many units you must sell at that price before the fixed costs are covered.