Profit Margin Calculator

Optimize your pricing and maximize your profits instantly.

Gross Profit

₹ 50.00

Margin

33.33%

Markup

50.00%

Profit Margin Formulas — All Three Types

Gross Profit Margin
(Revenue − COGS) ÷ Revenue × 100

Measures profitability after direct production costs only. Does not include overheads. Example: Revenue ₹1,50,000, COGS ₹1,00,000 → Gross Margin = 33.3%

Operating Profit Margin
EBIT ÷ Revenue × 100

Gross Profit minus operating expenses (rent, salaries, utilities). Excludes interest and taxes. Shows true business efficiency before financing costs.

Net Profit Margin
Net Profit ÷ Revenue × 100

Final bottom-line profitability after ALL expenses: COGS + overheads + interest + taxes. The most comprehensive measure of profitability.

Key insight — Margin vs Markup: If you buy at ₹100 and sell at ₹150 → Profit = ₹50  |  Margin = 33.3% (profit ÷ selling price)  |  Markup = 50% (profit ÷ cost). Same profit, different percentages — margin is always lower than markup for the same transaction.

Industry Profit Margin Benchmarks — India

Compare your gross and net margins against industry averages. Margins below benchmark suggest pricing or cost issues.

IndustryGross MarginNet MarginKey Driver
Software / SaaS65–85%15–25%Low COGS, high R&D spend
FMCG / Consumer Goods45–60%8–15%Brand premium, distribution
Healthcare / Pharma55–75%10–20%Regulatory moat, R&D
Professional Services40–60%10–20%People-heavy, low COGS
Manufacturing25–40%5–12%Raw material, plant costs
E-commerce / Retail20–40%2–5%High logistics, returns
Restaurants / Food60–70%3–9%High rent + labour costs
Trading / Wholesale5–15%1–3%Volume play, low margin

Note: Gross margins for restaurants appear high because food cost = ~30–40% of revenue, but rent + labour consume the rest.

Margin ↔ Markup Conversion Table

Quick reference to convert between the two without calculation errors.

Markup %Gross Margin %
10%9.09%
20%16.67%
25%20.00%
33.3%25.00%
50%33.33%
100%50.00%
200%66.67%
400%80.00%
Formulas:
Margin = Markup ÷ (1 + Markup)
Markup = Margin ÷ (1 − Margin)
5 Ways to Improve Your Margin
1

Raise prices 5–10% — most customers accept small increases without churn

2

Negotiate better supplier rates on your top 3 SKUs by volume

3

Reduce returns rate — each return reverses 100% of margin on that unit

4

Bundle low-margin with high-margin products to lift average margin

5

Eliminate SKUs below 10% gross margin — they consume resources silently

Frequently Asked Questions

Margin is profit as % of selling price: (Selling Price − Cost) ÷ Selling Price × 100. Markup is profit as % of cost: (Selling Price − Cost) ÷ Cost × 100. Example: Buy ₹100, sell ₹150 → Margin = 33.3%, Markup = 50%. Margin is always lower than markup for the same transaction.

Gross Profit Margin (%) = ((Revenue − COGS) ÷ Revenue) × 100. For example, if you sell a product for ₹500 that costs ₹350, your gross margin = (150 ÷ 500) × 100 = 30%. Net Profit Margin subtracts all expenses (overheads, salaries, taxes) from revenue before dividing.

It varies by industry. Retail net margins: 2–5%, Software/SaaS gross margins: 65–85%, FMCG: 8–15% net, Manufacturing: 5–12% net, Services: 10–20% net. Compare against your industry benchmark rather than an absolute number. A 5% margin in grocery is excellent; in software it's a red flag.

Gross margin = (Revenue − COGS) ÷ Revenue × 100. It excludes overheads, rent, salaries. Net margin = Net Profit ÷ Revenue × 100 — accounts for ALL expenses including taxes and interest. Gross margin is always higher. A restaurant with 65% gross margin can have just 3% net margin after rent and labour.

Higher margins mean more profit per unit but may reduce price competitiveness. Lower margins increase volume but reduce profit per rupee earned. The minimum viable margin must cover: COGS + overheads + owner's salary + growth reinvestment. Price below full-cost margin = slow financial death.

Selling Price = Cost ÷ (1 − Target Margin%). For a 30% margin on a ₹700 cost product: Selling Price = 700 ÷ 0.70 = ₹1,000. Common mistake: adding 30% markup instead → 700 × 1.30 = ₹910, which gives only 23% margin, not 30%.

Contribution Margin = Revenue − Variable Costs (only costs that change with each unit sold). Gross Margin = Revenue − COGS (includes all direct costs, some of which may be semi-fixed). CM is used for break-even analysis and pricing decisions. Example: Selling price ₹1,000, variable cost ₹600 → CM = ₹400 (40%).

High gross margin + low net margin = high operating expenses eating your profit. Common culprits: excess rent (>10% of revenue), over-staffing, high advertising spend, loan interest, or excessive owner drawings. Review your overhead-to-revenue ratio. Industry standard: total overheads should not exceed 70–80% of gross profit.
Reviewed 9 September 2026 Use these quick actions with the result shown on this page.

Transparent calculation

Business formula and assumptions

MethodGross profit = selling price − cost; margin % = gross profit ÷ selling price × 100
  1. Enter values from the same accounting period.
  2. Review the formula and calculated result.
  3. Compare scenarios and validate decisions against complete financial records.

Important assumption: The output is a planning estimate and does not replace complete accounts, valuation or professional advice.

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