Business Profit Margin Calculator

Gross profit margin = (Revenue - Cost of Goods Sold) / Revenue x 100. It measures how much profit remains after paying the direct costs of producing goods or services, before subtracting operating expenses like rent, salaries, and marketing. A higher gross margin indicates more pricing power.

Net profit margin = Net Profit / Revenue x 100. Net profit subtracts all operating expenses (including COGS, rent, utilities, salaries, marketing) and taxes from revenue. It is the bottom-line percentage of revenue that becomes actual profit. Industry averages vary widely: software companies may have 20-40% net margins while grocery retailers often operate at under 3%.

Markup is calculated as a percentage of cost: Markup = (Revenue - Cost) / Cost x 100. Margin is calculated as a percentage of revenue: Margin = (Revenue - Cost) / Revenue x 100. For the same numbers, markup is always higher than margin. For example, buying at $60 and selling at $100: Markup = 66.7%, Margin = 40%.

This varies enormously by industry. According to NYU Stern data, net profit margins average approximately 25-30% for software companies, 5-10% for manufacturing, 2-5% for retail, and 15-25% for pharmaceuticals. What matters most is whether your margin covers all costs and provides adequate return given the risk and capital invested.

Break-even revenue is the minimum revenue needed to cover all fixed and variable costs with zero profit or loss. Break-even = Total Fixed Costs / Gross Margin. If fixed costs are $50,000 and gross margin is 40%, you need $125,000 in revenue to break even.