Profit Margin Calculator
Calculate profit margin and gross margin for your business
Business Details
How Profit Margin is Calculated?
Profit margin is a key financial metric that shows what percentage of revenue is converted into profit. It's essential for evaluating business profitability, comparing performance across industries, and making strategic pricing decisions.
Profit Margin Formula/Equation
Profit Margin = (Revenue - Cost) / Revenue × 100%
Profit = Revenue - Cost
Gross Margin = (Revenue - Cost of Goods Sold) / Revenue × 100%
Where:
- Revenue = Total sales or income generated
- Cost = Total expenses (materials, labor, overhead, etc.)
- Profit = Revenue minus all costs
- Profit Margin = Percentage of revenue that is profit
Example:
Let's calculate profit margin for a business with revenue of ₹1,00,000 and total costs of ₹60,000.
Given: Revenue = ₹1,00,000, Cost = ₹60,000
Step 1: Calculate Profit
Profit = Revenue - Cost
Profit = ₹1,00,000 - ₹60,000
Profit = ₹40,000
Step 2: Calculate Profit Margin
Profit Margin = (Profit / Revenue) × 100%
Profit Margin = (₹40,000 / ₹1,00,000) × 100%
Profit Margin = 0.40 × 100%
Profit Margin = 40%
Result: Your profit margin is 40%, meaning 40% of your revenue is profit. For every ₹100 in revenue, you make ₹40 in profit.
Use Cases for Profit Margin Calculator
Business Analysis
Evaluate profitability and financial health
Pricing Decisions
Set prices to achieve target profit margins
Performance Comparison
Compare margins across products, services, or time periods
Cost Management
Identify areas to reduce costs and improve margins
Benefits of Using Our Profit Margin Calculator
Quick calculation of profit margins
Understand profitability at a glance
Make informed pricing and cost decisions
Compare gross and net profit margins
100% free, no registration required
Mobile-friendly design
Profit Margin Calculator FAQs
❓What is profit margin?
Profit margin is a percentage that shows how much profit a business makes for every rupee of revenue. It's calculated as (Profit / Revenue) × 100%. Higher profit margins indicate better profitability and efficiency.
❓What is a good profit margin?
Good profit margins vary by industry. Generally, 10% is average, 20% is good, and 30%+ is excellent. However, service businesses often have higher margins (50-90%) than retail businesses (5-15%). Compare your margin to industry benchmarks.
❓What's the difference between gross and net profit margin?
Gross profit margin = (Revenue - Cost of Goods Sold) / Revenue × 100%. Net profit margin = (Revenue - All Expenses) / Revenue × 100%. Gross margin shows production efficiency, while net margin shows overall business profitability after all expenses.
❓How can I improve my profit margin?
To improve profit margin: increase prices strategically, reduce costs (negotiate with suppliers, optimize operations), increase sales volume, eliminate low-margin products, improve efficiency, reduce waste, and focus on high-margin products/services.
❓Is this calculator free to use?
Yes, this profit margin calculator is completely free to use with no registration required.