Margin Calculator
Calculate profit margins and pricing strategies.
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Margin Formula
Profit margin is a financial metric that shows the percentage of revenue that remains as profit after accounting for the cost of goods sold.
Profit Margin = (Gross Profit / Revenue) × 100%
How to Calculate Margins
To calculate profit margin, follow these steps:
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1Determine the total revenue from sales
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2Calculate the total cost of goods sold
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3Subtract cost from revenue to get gross profit
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4Divide gross profit by revenue and multiply by 100
For example, if you have $1000 in revenue and $600 in costs:
Profit Margin = ($400 / $1000) × 100% = 40%
Margin - Practical Examples
Example 1 Retail Store
A clothing store has $5000 in revenue and $3000 in costs.
Gross Profit = $5000 - $3000 = $2000
Profit Margin = ($2000 / $5000) × 100% = 40%
Example 2 Restaurant
A restaurant has $8000 in revenue and $6000 in costs.
Gross Profit = $8000 - $6000 = $2000
Profit Margin = ($2000 / $8000) × 100% = 25%
Example 3 Software Company
A software company has $20000 in revenue and $8000 in costs.
Gross Profit = $20000 - $8000 = $12000
Profit Margin = ($12000 / $20000) × 100% = 60%