Profit Margin Calculator - Gross, Net and Markup (2026)

What Is Gross Margin vs Net Margin and Why Does the Difference Matter?

Gross profit is revenue minus direct cost of goods, showing what is left after making the product. Net profit subtracts operating and other costs, showing what is left after running the business. On $100,000 with $55,000 COGS, gross is $45,000 and gross margin is 45.0%; after $25,000 operating and $5,000 other, net is $15,000 and net margin is 15.0%. A product can have a strong 45% gross while the firm is barely profitable if overhead is high. According to the U.S. Census Bureau 2023, employer firms averaged $1.4 million receipts, so a 15% net margin is $210,000 on average receipts (Source: Census Bureau, census.gov). Use gross for product and pricing decisions, net for period profitability, and keep the same accounting basis across periods. At $120,000 revenue with $85,000 costs, net is $35,000 and margin is 29.2%, so $20,000 extra sales lifts net from $15,000 to $35,000 due to fixed leverage, a $20,000 profit on $20,000 sales that disappears if costs step.

Margin vs Markup: Why Does an 81.8% Markup Equal a 45% Margin?

Markup divides gross profit by cost, margin divides profit by revenue. On $100,000 revenue, $55,000 COGS and $45,000 gross, markup is $45,000/$55,000 = 81.8% on cost, while gross margin is $45,000/$100,000 = 45% on revenue. A 50% markup is only a 33.3% margin: $60 cost + $30 profit = $90 price, $30/$90 = 33.3%.

Pricing from cost should use markup, profit planning should use margin. See how volume changes fixed-cost leverage with the Break-Even Calculator.

How Much Revenue Do I Need for a 15% Net Margin?

Target revenue solves costs divided by one minus target. With $85,000 total costs ($55k COGS + $30k operating+other), 15% net needs $85,000/0.85 = $100,000 revenue, exactly the current case where $15,000/$100,000 = 15%. Raising the target to 20% needs $85,000/0.80 = $106,250, an extra $6,250 sales for the same costs. At a lower $60,000 revenue with the same $85,000 costs, net is −$25,000 and margin is −41.7%, showing how $40,000 less revenue flips 15% positive to deep negative. At $120,000 revenue with $85,000 costs, net is $35,000 and margin is 29.2%, so $20,000 more sales lifts net from $15,000 to $35,000, a $20,000 profit on $20,000 sales due to fixed leverage.

Cost behavior matters: if $10,000 of operating is actually variable at 10% of revenue, the formula changes. Use total costs at the entered level and retest when costs step. Model the hourly rate needed to support that revenue with the Freelancer Rate Calculator.

What Is a Good Profit Margin in 2026 by Industry?

Good depends on industry. BLS and Census data imply retail and grocery often see 2% to 5% net, restaurants 3% to 9%, professional services 12% to 20% and software 20% to 30% at scale (Source: U.S. Census Bureau Annual Business Survey — census.gov; Bureau of Labor Statistics — bls.gov/ppi). The example 15% net is strong for a physical product business and typical for a service business with $55k COGS on $100k revenue.

Compare consistently: use the same period, include owner market salary as an operating cost, and separate one-time items. A 45% gross with 15% net leaves 30 points of operating leverage; cutting $5,000 of fixed operating at $100k revenue lifts net from 15% to 20% without selling more. Test the pricing that supports that margin with the Invoice Calculator and the return on the capital behind it with the ROI Calculator.