Profit Margin Calculator
Calculate gross, operating, and net profit margins and compare against industry benchmarks.
Financial Data
Gross Margin
60.0%
$300,000
Operating Margin
30.0%
$150,000
Net Margin
20.0%
$100,000
vs Retail Average
Per Dollar Analysis
Three Types of Profit Margin
| Margin | Formula | What It Shows |
|---|---|---|
| Gross Margin | (Revenue − COGS) ÷ Revenue | Production/sourcing efficiency |
| Operating Margin | (Revenue − COGS − OpEx) ÷ Revenue | Business operation efficiency |
| Net Margin | Net Profit ÷ Revenue | Overall profitability after all costs |
Industry Average Margins
Profit margins vary enormously by industry. Software companies average 20-25% net margins thanks to low marginal costs. Restaurants operate on razor-thin 3-9% net margins. Retail averages 2-5%. Professional services like consulting can hit 15-25%. Comparing your margins to the right industry benchmark matters far more than aiming for an arbitrary target.
How to Improve Profit Margins
Focus on the margin type that's weakest. Low gross margin? Negotiate supplier costs, raise prices, or reduce waste. Low operating margin? Cut overhead — renegotiate rent, automate processes, reduce headcount inefficiency. Low net margin? Review interest expenses, tax strategy, and one-time costs that may be masking true performance.
BLS — Industry Data→Frequently Asked Questions
What's a healthy profit margin?
A 10% net margin is considered average, 20%+ is strong, and 5% or less is thin. But context matters — a grocery store with 2% net margin on $50M revenue generates $1M profit, while a consultant with 30% margin on $200K generates $60K.
How is markup different from margin?
Margin is profit divided by revenue: a $100 item with $60 cost has 40% margin. Markup is profit divided by cost: the same item has 67% markup. They describe the same relationship from different perspectives. Never confuse the two — applying a 40% markup is not the same as earning a 40% margin.
Related tools: Break-Even Calculator and Business Loan Calculator.