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Calculate gross, operating, and net profit margins. Free, with markup and industry benchmarks.
Direct cost of the product: materials, manufacturing, fulfillment
Gross margin
60.00%
$6,000.00 profit on $10,000.00 revenue
Gross margin
Revenue minus cost of goods sold (COGS).
Profit margin is the most common financial metric — and the most misunderstood. Gross, operating, and net margins measure fundamentally different things. Confusing them leads to pricing decisions based on inflated numbers.
| Industry | Gross | Operating | Net |
|---|---|---|---|
| SaaS (mature) | 75–90% | 20–35% | 15–30% |
| Ecommerce — apparel | 50–65% | 10–20% | 5–15% |
| Ecommerce — electronics | 20–35% | 3–10% | 2–6% |
| Restaurants | 60–70% | 8–15% | 3–8% |
| Agencies / services | 50–70% | 15–25% | 10–20% |
A product costs $10 and sells for $20. That's a 50% gross margin (profit of $10 ÷ $20 revenue) and a 100% markup (profit of $10 ÷ $10 cost). Same transaction, different denominator, different numbers. Retail and manufacturing usually speak in markup; finance and boards speak in margin. Know which language you're in.
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Gross margin = revenue minus COGS (direct product cost). Operating margin also subtracts operating expenses (staff, rent, marketing, software). Net margin subtracts everything including taxes and interest. Each gives a different view of profitability — gross shows product efficiency, net shows what the business actually keeps.
Profit Margin = (Profit ÷ Revenue) × 100. The definition of 'profit' depends on which margin you're measuring. Gross profit is revenue minus COGS. Operating profit subtracts operating costs. Net profit subtracts all remaining expenses.
Depends heavily on industry. Ecommerce apparel: 50–60% gross, 5–15% net. SaaS: 70–90% gross, 15–30% net. Restaurants: 60–70% gross, 3–8% net. DTC brands post-ad-spend often sit at 10–20% net margin. SaaS and software have the highest net margins because incremental units have no COGS.
Margin is profit as a % of revenue. Markup is profit as a % of cost. A product that costs $10 and sells for $20 has a 50% margin but 100% markup. Same dollars, different denominator. Retailers usually talk in markup; finance and investors talk in margin.
Operating and 'other' costs — rent, salaries, marketing, software, taxes — compound between the two. For ad-reliant DTC brands, the gap can be 40+ percentage points: a 60% gross margin can end at 10% net once ad spend, fulfillment, and payroll are accounted for.
Three levers: raise prices (margin ↑ directly, usually without proportional volume loss if positioning is strong), lower COGS (supplier renegotiation, MOQ volume discounts), or reduce overhead (especially fixed software and tool spend). Pricing is almost always the fastest lever with the highest impact.
