Analysis & valuation
Gross margin, net margin and markup, from the P&L
A profit margin calculator: owners enter revenue, cost of goods sold and operating expenses to see gross profit, gross and net margin and markup on cost.
Included in Network. 14-day trial, cancel any time.
What's the difference between margin and markup?
Margin is profit as a percentage of the selling price; markup is profit as a percentage of cost. Selling for $200,000 what cost $120,000 is a 40% gross margin but a 66.7% markup. Confusing them leads to underpricing: a 40% markup only produces a 28.6% margin.
When the year-end P&L is ready
The annual financial statements arrive, and owners want to know whether their margins are healthy. Others are setting prices and confuse margin with markup. Both want quick, clear numbers.
What the client types into a search box
“what is a good profit margin for my business”
How a client works through it
Enter revenue
Total sales for the period.
Enter cost of goods sold
Direct costs of what was sold.
Enter operating expenses
Overhead such as rent and salaries.
See margins
Gross profit and margin, net profit and margin, markup.
What lands in your inbox
When a client asks your firm to review the result, the request arrives as a contact record with their inputs and results attached, by email and, on paid plans, by webhook to your CRM.
Received
Revenue, COGS and operating expenses show scale and profitability. Thin net margins with healthy gross margins point to overhead; thin gross margins point to pricing or supplier costs.
Reading gross and net margins
Gross Profit and Gross Margin show what's left after direct costs. Net Profit and Net Margin show what's left after overhead. Markup on Cost shows gross profit as a share of cost, the figure many owners use for pricing.
Margins depend on how costs are classified, which is where the bookkeeper's work matters.
Results shown: Gross Profit · Gross Margin · Net Profit · Net Margin · Markup on Cost.
Margin versus markup
Revenue $200,000, COGS $120,000: gross profit $80,000, gross margin 40%, markup 66.7% ($80,000 ÷ $120,000). With $50,000 of operating expenses, net profit is $30,000, a 15% net margin.
Why margin conversations lead to advisory work
Margins tie directly to the monthly P&L that bookkeepers and CPAs prepare. Explaining them, and benchmarking against the industry, is the simplest advisory service a compliance firm can add.
The margin-versus-markup confusion alone saves some clients significant money once corrected.
Follow-ups this request opens
- Benchmark margins against industry data
- Review pricing and markup policies
- Analyze overhead for savings
- Set up monthly margin reporting
What this calculator leaves out
- Depends on correct cost classification.
- Pre-tax net profit.
- No benchmarks included.
- Single period only.
Platform disclaimer shown under the calculator: Estimates only. Margins depend on how you classify costs and your accounting period. Use as a planning guide, not financial statements.
Compliance note for firms
Margin calculations are management tools, not financial statements. If shared with lenders or buyers, they should reconcile to the books. CPA firms providing attest services to the client should consider independence when advising on pricing.
Not legal advice. See our disclaimer and the guide to compliance for client calculators.
Terms your client sees in the calculator
These definitions appear in the calculator's collapsible Definitions block, so clients don't have to call to ask what a label means.
- Gross margin
- Gross profit divided by revenue, shown as a percentage. It measures how much of each sales dollar remains after the direct cost of what was sold, before overhead. With $200,000 in revenue and $120,000 in cost of goods sold, gross margin is 40%. It is the figure most used to compare pricing and production efficiency.
- Net margin
- Net profit divided by revenue: the share of each sales dollar left after cost of goods sold and operating expenses. In this calculator it excludes interest and income taxes, so it is closer to an operating margin than to the bottom-line net margin on a formal income statement.
- Markup
- Gross profit divided by cost of goods sold, rather than by revenue. The same sale gives a higher markup than margin: selling for $200,000 what cost $120,000 is a 66.7% markup but a 40% gross margin. Mixing the two when setting prices is a common source of underpricing.
- Revenue
- Total sales for the period before any costs are subtracted, sometimes called the top line. Use net sales, meaning after returns, discounts and allowances, for consistent margins. Revenue and costs should cover the same period, since mixing a quarter of sales with a year of expenses distorts every result.
- Cost of goods sold (COGS)
- The direct costs of producing or buying what you sold in the period: materials, inventory purchases, direct labor and manufacturing overhead. It excludes rent, marketing and administrative salaries, which are operating expenses. Where a cost is classified changes gross margin, though not net profit.
- Gross profit
- Revenue minus cost of goods sold: the money left to cover operating expenses and profit. A business can have a healthy gross profit and still lose money if overhead is too high, which is why the calculator reports both gross and net figures.
Profit Margin calculator: questions from firms and clients
What's a good profit margin?
It varies by industry; compare with peers rather than a single number.
Margin or markup for pricing?
Either, as long as you know which you're using.
What counts as COGS?
Direct costs of products or services sold.
Is net profit before tax?
Yes, here.
Can service firms use it?
Yes, with direct labor as COGS.
Why is markup higher than margin?
Because it divides by the smaller cost figure.
How often should I check margins?
Monthly is ideal.
Which plan includes it?
Network. See pricing.
No question matches that filter. Clear it to see them all, search the whole site, or ask us directly; we reply within one business day.
Clients who ask this usually ask next
Break-Even
how many sales do I need to break even
Financial Ratios
what ratios do banks look at for a business loan
Contribution Margin & Break-Even
how many units do I need to sell to make a profit of
All “Analysis & valuation” calculators · Everything in Business
Next entry
Answer the February question before the client calls
Embed the Profit Margin calculator on your firm's site in an afternoon and receive requests with the numbers already filled in.
Firm and Network plans include a 14-day trial. Cancel before it ends and you pay nothing.