Profit Margin Calculator

Calculate gross, operating, and net profit margins. Measure business profitability and efficiency.

Gross Profit
$grossProfit
Revenue after direct costs
Gross Profit Margin
grossMargin%
Gross profit as % of revenue
Operating Profit
$operatingProfit
Profit from core operations
Operating Margin
operatingMargin%
Operating profit as % of revenue
Net Profit
$netProfit
Final profit after all expenses
Net Profit Margin
netMargin%
Net profit as % of revenue
💡 Profit Margin Benchmarks
• SaaS gross margin target: 75-85%
• SaaS operating margin: 0-20% (growth stage), 20-40% (mature)
• Retail gross margin: 20-50%
• Professional services: 40-60%
• Net margin varies widely by industry and stage

Profit Margin Analysis

Profit margins measure how efficiently you convert revenue into profit.

Three Key Margins

Gross Margin: (Revenue - COGS) / Revenue × 100
Operating Margin: (Revenue - COGS - OpEx) / Revenue × 100
Net Margin: Net Profit / Revenue × 100

Margin Waterfall

Revenue flows through your business with costs at each level:

  • Revenue: Total sales ($500k)
  • - COGS: Direct costs ($200k) → Gross Profit: $300k (60%)
  • - OpEx: Operating costs ($150k) → Operating Profit: $150k (30%)
  • - Other: Interest, taxes ($30k) → Net Profit: $120k (24%)

Each margin tells a different story about business health and efficiency.

Frequently Asked Questions

What is the difference between gross, operating, and net profit margin?

Gross margin = (Revenue - COGS) / Revenue. Measures product profitability. Operating margin = (Revenue - COGS - OpEx) / Revenue. Measures operational efficiency. Net margin = (Revenue - All Expenses) / Revenue. Measures overall profitability. Example: $500k revenue, $200k COGS, $150k OpEx, $30k other = 60% gross, 30% operating, 24% net margin.

What is a good profit margin?

Good margins vary by industry and stage. SaaS: 75-85% gross, 20%+ operating (mature), 0-10% (growth). E-commerce: 30-50% gross, 5-15% net. Professional services: 40-60% gross, 15-25% net. Retail: 20-50% gross, 2-5% net. Growth companies prioritize revenue over margin initially.

How do I improve profit margins?

Six strategies: 1) Increase prices (value-based pricing, premium positioning), 2) Reduce COGS (better suppliers, economies of scale), 3) Improve efficiency (automation, processes), 4) Cut operating expenses (reduce waste, optimize spend), 5) Upsell higher-margin products, 6) Reduce customer acquisition costs. Focus on gross margin first, then operating leverage.

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