Profit Margin Calculator: A Complete Guide

Profit Margin Calculator: A Complete Guide

If you do not know your margins, you do not know your business. Here are the three margin formulas every small business owner needs.

Gross Profit Margin

Formula: (Revenue minus Cost of Goods Sold) divided by Revenue, times 100

This is the percentage of revenue left after paying for the product itself. It tells you whether your pricing makes basic sense.

Healthy benchmarks:

• Retail: 30 to 50 percent

• Restaurants: 60 to 70 percent on food

• Services: 50 to 70 percent

• Wholesale: 15 to 30 percent

Operating Profit Margin

Formula: Operating Income divided by Revenue, times 100

Subtract operating costs (rent, salaries, utilities) from gross profit. This shows whether the business as a whole is healthy, not just individual products.

Net Profit Margin

Formula: Net Income divided by Revenue, times 100

Everything subtracted, including taxes and interest. The bottom line.

How ExpressBizTools Helps

By tracking cost and sale price for every product, your reports automatically show gross margin per item, per category, and overall.

Action Steps

1. Pull your top 20 products by revenue

2. Calculate gross margin on each

3. Identify the 3 lowest — raise prices, drop them, or replace them

4. Repeat next quarter