📊 Gross Margin Calculator
Calculate gross profit margin
How to Use This Calculator
Enter Revenue
Input the total revenue (sales) - all income from sales, services, or other business activities.
Enter Cost of Goods Sold
Enter the cost of goods sold (COGS) - direct costs of producing goods or services sold (materials, labor, direct overhead).
Review Gross Margin
See the gross profit margin percentage - the percentage of revenue that becomes gross profit after deducting COGS. Higher margins indicate better profitability.
Formula
Gross Profit = Revenue - Cost of Goods Sold
Gross Margin = (Gross Profit / Revenue) × 100
Example Calculation:
If revenue $100,000, COGS $60,000:
• Gross profit = $100,000 - $60,000 = $40,000
• Gross margin = ($40,000 / $100,000) × 100 = 40%
About Gross Margin Calculator
A gross margin calculator helps you calculate the gross profit margin percentage, which measures the profitability of sales after deducting the direct costs of goods sold. Gross Margin = (Gross Profit / Revenue) × 100, where Gross Profit = Revenue - Cost of Goods Sold. Gross margin shows the percentage of revenue that becomes gross profit and is an important metric for assessing pricing strategy, cost management, and profitability. Higher gross margins indicate better profitability and pricing power.
When to Use This Calculator
- Profitability Analysis: Assess gross profitability
- Pricing Strategy: Evaluate pricing and cost management
- Performance Comparison: Compare gross margins across products or periods
- Financial Analysis: Analyze gross profitability
Understanding Gross Margin
- Higher Margin: Better profitability (generally good)
- Lower Margin: Lower profitability (may need improvement)
- Industry Standards: Margins vary by industry
- Pricing Power: Higher margins indicate better pricing power
Why Use Our Calculator?
- ✅ Profitability Analysis: Calculate gross margin accurately
- ✅ Pricing Strategy: Evaluate pricing and costs
- ✅ Performance Comparison: Compare gross margins
- ✅ Financial Analysis: Analyze gross profitability
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is gross margin?
Gross margin (also called gross profit margin) measures the profitability of sales after deducting the direct costs of goods sold. Gross Margin = (Gross Profit / Revenue) × 100, where Gross Profit = Revenue - Cost of Goods Sold. Gross margin shows the percentage of revenue that becomes gross profit and is an important metric for assessing pricing strategy, cost management, and profitability. Higher gross margins indicate better profitability and pricing power.
What's a good gross margin?
A good gross margin depends on the industry and business model. Generally, gross margins above 50% are considered excellent, 30-50% are good, 20-30% are average, and below 20% are low. However, margins vary significantly by industry: Software/SaaS (70-90%), Retail (20-30%), Manufacturing (30-50%), Services (40-60%). Compare to industry benchmarks and historical trends. Higher margins indicate better pricing power and cost efficiency.
How do I improve gross margin?
To improve gross margin: (1) Increase prices - raise selling prices if market allows, (2) Reduce COGS - negotiate better supplier prices, improve efficiency, reduce waste, (3) Product mix - focus on higher-margin products, (4) Volume discounts - negotiate better pricing from suppliers, (5) Efficiency - improve production efficiency and reduce direct costs. The goal is to increase gross profit while maintaining or growing revenue.
How is gross margin different from net margin?
Gross margin measures profitability after direct costs (COGS), while net margin measures profitability after all expenses (COGS, operating expenses, taxes). Gross margin = (Revenue - COGS) / Revenue, while net margin = Net Income / Revenue. Gross margin shows pricing and cost efficiency, while net margin shows overall profitability. Gross margin is a subset of net margin - net margin is always lower because it includes all expenses.