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Profit Margin Calculator

Calculate profit margin percentage and dollar profit from revenue and cost.

About the Profit Margin Calculator

Profit margin measures how much of every dollar of revenue a business actually keeps as profit after covering costs — a core number for pricing decisions, investor conversations, and comparing performance against competitors. This calculator turns revenue and total cost into a clear profit margin percentage and dollar profit figure.

How It Works

The calculator subtracts total cost from revenue to find dollar profit, then divides that profit by revenue to express it as a percentage. Margin is always measured against revenue, not cost, which is what distinguishes it from markup — a distinction that trips up many first-time business owners.

Profit = Revenue − Cost; Profit Margin (%) = Profit / Revenue × 100.

Worked example

Scenario: Revenue of $50,000 and total costs of $35,000 for the month.

  1. Profit: $50,000 − $35,000 = $15,000.
  2. Profit margin: $15,000 ÷ $50,000 × 100 = 30%.

Result: A 30% profit margin — 30 cents of every sales dollar is profit.

Use margin to understand pricing

Profit margin expresses profit as a percentage of revenue. It is useful for comparing profitability across sales levels, but the meaning depends on whether the inputs represent gross profit, operating profit, or net profit. Keep the definition consistent.

Tips and common mistakes

  • Use total costs for net margin, or cost of goods only for gross margin (enter cost of goods sold as the cost to get gross profit and gross margin).
  • Margin is based on the selling price; markup is based on cost. A 30% margin equals a 42.86% markup.
  • Compare margins across periods with the same cost definitions, or the trend will mislead.

Assumptions & Limitations

  • Cost is assumed to represent all costs attributable to the revenue being measured, including cost of goods sold.
  • Revenue is assumed to be net of returns and discounts already applied.
  • Does not separate gross margin from net margin — include only the costs relevant to the margin you want to measure.
  • A single-period snapshot; trends over multiple periods often matter more than one number.

Frequently Asked Questions

What is a good profit margin?

It varies enormously by industry — grocery retailers often run on single-digit margins while software companies can exceed 70%, so compare your margin to industry peers rather than a universal benchmark.

Is profit margin the same as markup?

No — margin is profit divided by revenue (the selling price), while markup is profit divided by cost; the two numbers are always different for the same sale except at 0% profit.

How can I improve my profit margin?

Raising prices, reducing cost of goods sold, or cutting operating expenses are the three levers that increase margin, though each has trade-offs with volume and competitiveness.

Can margin be negative?

Yes. If costs are higher than revenue, the margin is negative and shows the loss as a share of sales.

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