Gross Margin Calculator: Profit, Margin and Markup

Gross margin is the share of revenue you keep after paying for the goods you sold. The gross margin formula is straightforward: gross profit divided by revenue, times 100, where gross profit is revenue minus cost of goods sold (COGS). It is the single clearest gauge of whether your pricing covers your direct costs, and the gross margin calculator above runs the math the moment you type.

How to calculate gross margin

Start with two numbers: revenue and COGS. COGS is only the direct cost of producing or buying what you sold, such as materials, the wholesale price, or production labor. It does not include rent, salaries or marketing. Subtract COGS from revenue to get gross profit, then divide by revenue.

Worked example: you sell $10,000 of product in a month and the goods cost you $6,000. Gross profit is $10,000 minus $6,000, which is $4,000. Your gross profit margin is $4,000 divided by $10,000, or 40%. The same gross profit divided by the $6,000 cost gives a 67% markup. Keep COGS consistent month to month so the trend means something.

What is a good gross margin?

There is no universal target, because cost structures differ wildly. As a rough guide: grocery and general retail often run 25% to 35%, restaurants land near 60% to 70% on food, manufacturing sits around 30% to 40%, professional services reach 50% or more, and software or SaaS commonly post 70% to 90%. Judge your gross profit margin against your own industry, not the economy as a whole. A 35% margin is excellent for a supermarket and worrying for a software company.

The deeper point: a higher gross margin gives you more cash per sale to cover everything else and to reinvest. If your number sits below your sector range, the fix is usually pricing discipline or supplier negotiation, not just selling more.

Gross margin vs net margin vs markup

These three get confused constantly. Gross margin counts only COGS. Net margin goes further and subtracts every other cost, rent, payroll, marketing, interest and tax, so it tells you what actually reaches the bottom line. A company can show a 60% gross margin and a 5% net margin once the overhead is paid.

Markup is the same gross profit measured against cost rather than price, so it always reads higher than the matching margin: a 40% margin is a 67% markup. Use margin to understand profitability and markup to set prices from a known cost. When customers worth more than your acquisition cost arrive through organic search, that revenue lands at full margin, which is exactly why SEO compounds into profit over time.