Margin Calculator

Margin Calculator: Profitability Analysis

In business, "top line" (revenue) is vanity, but "bottom line" (profit) is sanity. The Margin Calculator helps you determine the Gross Profit Margin of your products or services. This metric reveals how much of every dollar of sales is actual profit after covering the direct cost of goods sold (COGS).

Margin vs. Markup: The Critical Difference

Entrepreneurs often confuse margin and markup, which can lead to pricing errors and lost profits.

Metric	Formula	Perspective
Gross Margin	(Profit / Revenue) × 100	Percentage of revenue that is profit.
Markup	(Profit / Cost) × 100	Percentage added to cost to get price.

Example: You buy a shirt for $50 and sell it for $100.
Profit = $50.
Markup = ($50/$50) = 100%.
Margin = ($50/$100) = 50%.

Why Margin Matters

Gross margin is the first line of defense for your business. It must be high enough to cover all your operating expenses (OpEx)—rent, utilities, salaries, marketing, and software—while still leaving a net profit.

Pricing Power: High margins indicate a unique product or strong brand (e.g., Apple).
Efficiency: Increasing margins suggests you are negotiating better costs with suppliers or reducing waste.
Viability: If your gross margin is negative, you lose money on every sale. No amount of volume will fix that.

Typical Margins by Industry

What is a "good" margin? It varies wildly:

Software (SaaS): 70-85% (Very high)
Clothing Retail: 45-55%
Electronics: 20-30%
Grocery Stores: 1-3% (Volume based)

Frequently Asked Questions

Can margin be more than 100%?

No. Since margin is a portion of the sale price, it can never exceed 100% (unless your cost is negative, which is impossible). Markup, however, can be infinite.

How do I increase my margin?

You have two levers: increase prices (without losing too much volume) or decrease costs (negotiate with suppliers, use cheaper materials, or improve efficiency).