Profit Margin Calculator

Good profit margins vary by industry. A 10% net margin is average across all industries. Grocery stores often operate at 1% to 3%, while software companies may achieve 20% to 40%. Compare your margins to industry peers for a meaningful benchmark.

Gross margin measures revenue minus cost of goods sold (direct costs). Net margin subtracts all expenses including operating costs, taxes, and interest. A business can have a healthy gross margin but poor net margin if operating expenses are too high.

You can increase margins by raising prices, reducing cost of goods through better supplier terms, lowering operating expenses, improving operational efficiency, or focusing on higher-margin products and services. Often a combination of small improvements yields the best results.

Profit margin is generally more important for long-term sustainability. A business with $1 million in revenue and 2% margin earns less than one with $500,000 in revenue and 20% margin. Revenue growth without healthy margins can actually accelerate losses.