Gross Profit Margin Calculator
Calculate your product profitability before overheads
Gross Margin
0%
Gross Profit:
0
Markup:
0%
How to use the Gross Profit Margin Calculator
Gross Profit Margin is the percentage of revenue that exceeds the Cost of Goods Sold (COGS). It shows how much profit a company makes on its products before deducting other costs like rent, marketing, and taxes. To use this tool, enter the cost it took to produce or buy the item and the price you sold it for. The tool calculates the Gross Profit (cash), the Gross Margin (percentage of selling price), and the Markup (percentage of the cost). Understanding this difference is vital for pricing your products correctly to ensure long-term sustainability.
- Margin vs. Markup: Margin is calculated based on the Selling Price, while Markup is based on the Cost. Many new business owners confuse the two!
- Benchmarking: Compare your margins with competitors to see if you are overpaying for supplies or underpricing your goods.
- Profit Buffer: A healthy gross margin provides the "room" you need to cover your operating expenses and still have a net profit at the end.
What is the difference between Margin and Markup? +
Markup is the percentage added to the cost to reach the selling price. Margin is the percentage of the final selling price that is profit. For example, if cost is $50 and selling price is $100, the markup is 100%, but the margin is 50%.
What is a "Healthy" Gross Margin? +
It varies greatly. Software (SaaS) often has 80-90% margins, while retail clothing might be 50%, and electronics or groceries might be as low as 5-15%.
Does this include shipping costs? +
Yes, any cost directly tied to acquiring or making the product (like shipping to your warehouse, packaging, or raw materials) should be included in the "Cost" field.
Why is my gross margin decreasing? +
This usually happens if your supplier increases their prices but you don't increase your selling price, or if you are offering too many deep discounts/sales.
Is Gross Profit the same as Net Profit? +
No. Gross Profit only subtracts the cost of the item. Net Profit is what's left after *all* other expenses (rent, salaries, electricity, taxes) are also subtracted.
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