Calculate your gross profit margin percentage from revenue and cost of goods sold. Instant results, no signup needed.
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Gross Margin Calculator
Enter Revenue and COGS to calculate your gross profit margin
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Results
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Gross Profit
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Gross Margin
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% of revenue
Gross Profit
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dollars
Revenue
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net sales
COGS Ratio
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% of revenue
Gross Margin Quality—
Formula Used
Gross Margin = (Revenue − COGS) ÷ Revenue × 100
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What Is Gross Margin?
Gross margin is the percentage of revenue remaining after subtracting the direct cost of producing goods or delivering services — known as the Cost of Goods Sold (COGS). It's one of the most important metrics in business finance because it shows how efficiently your company converts sales into profit before accounting for overhead.
Unlike net margin, gross margin excludes operating expenses like rent, salaries, and marketing. It isolates your production or sourcing efficiency, making it easier to benchmark against competitors in the same industry.
📊 Real Business Example
An e-commerce store has $250,000 in annual revenue. Their COGS (product cost + shipping + packaging) is $140,000.
Gross Profit: $110,000 | Gross Margin: 44%
That 44% covers all operating expenses and ideally leaves net profit. If operating costs run $80,000, net profit is $30,000 — a 12% net margin.
What's Included in COGS?
COGS includes all direct costs tied to producing your product or service: raw materials, wholesale product costs, direct labor, manufacturing overhead, freight and shipping costs, and packaging. It does not include indirect costs like office rent, executive salaries, or marketing spend — those reduce net margin, not gross margin.
Enter your total revenue (net sales, after returns and discounts).
Enter your COGS — direct costs of goods sold in the same period.
The calculator shows gross margin %, gross profit in dollars, and the COGS ratio.
Compare your result to industry benchmarks to assess pricing power.
Frequently Asked Questions
Gross margin is the percentage of revenue that remains after subtracting the cost of goods sold (COGS). It measures production and sourcing efficiency. Formula: (Revenue − COGS) / Revenue × 100. A 40% gross margin means you keep $40 from every $100 of sales before operating expenses.
It depends on the industry. Software: 60–80%. Retail: 30–50%. E-commerce: 30–45%. Manufacturing: 20–40%. Restaurants: 60–70% on food cost. Grocery: 25–35%. Always compare within your specific industry — a 25% margin is great for manufacturing but concerning for software.
Gross profit is a dollar amount (Revenue − COGS). Gross margin is a percentage (Gross Profit ÷ Revenue × 100). A company with $1M revenue and $600K COGS has $400K gross profit and a 40% gross margin. Both measure the same thing — just in different units.
Gross margin only subtracts COGS. Net margin subtracts everything — COGS, operating expenses, interest, depreciation, and taxes. Net margin is always lower. A business can have a 50% gross margin but only a 10% net margin after paying for overhead, staff, and marketing.
Five main levers: (1) Raise prices without losing volume, (2) Negotiate better COGS with suppliers, (3) Buy in bulk to reduce per-unit cost, (4) Discontinue low-margin SKUs, (5) Shift product mix toward higher-margin items. Even a 5% gross margin improvement can double net profit.
A negative gross margin means COGS exceeds revenue — you lose money on every sale before even covering overhead. This is unsustainable in the long term. Fix it immediately by raising prices or reducing direct costs. Some startups accept negative margins temporarily to gain market share, but it requires external funding.
Investors track gross margin as a signal of pricing power, competitive moat, and scalability. High gross margins mean more revenue can flow to growth investments. Declining gross margins signal pricing pressure or rising costs — both red flags. SaaS investors particularly watch gross margin because it predicts long-term unit economics.
Track both. Monthly gross margin helps catch problems early — if it suddenly drops, you can investigate before it compounds. Annual gross margin is what investors and lenders use for benchmarking. Seasonal businesses should look at trailing twelve months (TTM) for the most accurate picture.