Profit Margin Calculator

How to calculate profit margin — step by step

1. Find your revenue — total sales income for the period.
2. Subtract COGS (cost of goods sold, or direct costs). This gives you gross profit.
3. Apply the formula: Gross Margin % = Gross Profit ÷ Revenue × 100
4. To get operating margin, also subtract operating expenses (salaries, rent, utilities).
5. To get net margin, also subtract interest and tax.

Quick example

A business has revenue of £80,000, COGS of £48,000, and operating expenses of £18,000:

• Gross Profit = £80,000 − £48,000 = £32,000
• Gross Margin = £32,000 ÷ £80,000 × 100 = 40%
• Operating Income = £32,000 − £18,000 = £14,000
• Operating Margin = £14,000 ÷ £80,000 × 100 = 17.5%

Margin vs markup

A common mistake is confusing margin and markup. Margin uses selling price as the base; markup uses cost as the base. A 25% markup = a 20% margin. Use the calculator above to see both simultaneously.

Frequently asked questions

How do I calculate profit margin in Excel?
Use =(Revenue - COGS) / Revenue and format as percentage. Or skip the spreadsheet and use this calculator.

What is a healthy profit margin for a small business?
Net margins of 10–20% are typically solid for small businesses. Service companies tend to run higher than product companies. Always compare to your industry average.

How is gross margin different from net margin?
Gross margin only deducts direct production costs. Net margin deducts everything — operating costs, interest, and tax. Net margin reflects true bottom-line profitability.

Can profit margin exceed 100%?
No. Profit margin is capped at 100% (which would mean zero costs). Markup, however, can exceed 100%.