Util Tools What is profit margin?
Profit margin is profit expressed as a percentage of revenue: it answers "of every dollar of sales, how much do we keep?" The formula is margin % = (profit / revenue) * 100. It is the standard way to measure profitability because it is comparable across products and businesses of different sizes. This calculator computes gross and net margin, markup, and a full profit-and-loss waterfall.
Gross vs. net margin
Gross margin is revenue minus the direct cost of goods sold, divided by revenue; it shows how profitable your product is before overhead. Net margin subtracts all other expenses too (operating costs, interest, taxes), revealing what actually reaches the bottom line. A healthy gross margin can still produce a thin net margin if overhead is high, which is why you track both.
Margin vs. markup
Margin and markup measure the same profit against different bases: margin is a percentage of the selling price, while markup is a percentage of cost. Margin is always the smaller number for the same item. Knowing both lets you translate between how you price (markup) and how you report profitability (margin).
What is a good profit margin?
It varies enormously by industry. Software and digital products can run very high margins, while grocery and retail operate on a few percent net. As rough guidance, a net margin around 10% is often considered average, 20% good, and 5% or below thin, but always benchmark against your specific sector rather than a universal number.
Benchmarks are general guidance, not financial advice.
최종 업데이트: 2026년 9월