Free tool · Profit margin
Profit Margin Calculator
Calculate your gross profit margin and operating (net) profit margin from revenue, cost of goods sold, and operating expenses.
Gross margin is what is left after the direct cost of what you sell. Operating (net) margin is what is left after operating expenses too. Both are before tax.
Gross margin vs. operating margin
Gross margin tells you how profitable each sale is before overhead — revenue minus the cost of goods sold. Operating (net) margin goes further, subtracting operating expenses like rent, payroll, and marketing. Together they show where the money goes and how much actually drops to the bottom line.
Why margins matter when you sell
Buyers pay for durable, transferable profit. A business with healthy, stable margins earns a higher valuation multiple than one with thin or erratic margins. If you're thinking about selling, see how to value a business and what your business is worth.
Frequently asked questions
Profit margin is profit divided by revenue, expressed as a percentage. Gross margin uses gross profit (revenue minus cost of goods sold). Operating or net margin uses profit after operating expenses too.
Gross margin is what's left after the direct cost of what you sell (COGS). Operating (net) margin is what's left after operating expenses — rent, payroll, marketing — are also subtracted. Net margin is the truer measure of profitability.
It varies widely by industry. Service businesses often run high gross margins but lower net margins; product businesses are the reverse. Compare against businesses in your own sector rather than a universal benchmark.
Margins drive value. A business with healthy, stable margins commands a higher multiple than one with thin or volatile margins, because buyers see more durable, transferable profit. Improving margin before a sale can directly raise the price.
Strong margins? See what they're worth.
Healthy margins command higher multiples. Get a confidential, no-cost valuation from our advisors.
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