See what every dollar of revenue actually keeps.
Enter your revenue and costs to watch one dollar of sales flow down through cost of goods, operating expenses, taxes and interest, all the way to net profit. Gross, operating and net margins, side by side.
The numbers
What these margins tell you
From revenue down to net profit
The waterfall
Margin scorecard
Each profit level
Each level strips out one more layer of cost. The margin is that profit divided by revenue.
| Profit level | Amount | Margin | What it measures |
|---|
Profit margins, explained
Three Margin Levels
Gross = Revenue - COGS. Operating = Gross - OpEx. Net = Operating - Taxes - Interest. Each measures different efficiency, production, operations, and after all costs.
Industry Benchmarks
SaaS: 70-90% gross, 5-20% net. E-commerce: 30-60% gross, 2-10% net. Retail: 25-50% gross, 2-5% net. Restaurants: 60-70% gross, 3-8% net. Compare to your industry, not absolutes.
Margin Trends Matter
Improving margins = pricing power or efficiency. Declining margins = competitive pressure or cost inflation. Track quarter over quarter and year over year.
Improving Each Margin
Gross: raise prices, reduce COGS (volume discounts, automation). Operating: reduce overhead, streamline operations. Net: tax planning, lower interest debt.
Common questions
What's in COGS?
Direct costs of producing what you sell. Materials, direct labor, manufacturing overhead. NOT marketing, admin, R&D, those are operating expenses.
Why is SaaS gross margin so high?
Once code is written, additional users cost almost nothing (small hosting cost). Compare to manufacturing where each unit has material + labor cost.
Should I include depreciation?
In operating expenses, yes (it's a real economic cost). Some companies report EBITDA which excludes D&A, useful for comparing across capital intensity.
What's a healthy net margin?
Depends on industry. 10%+ generally good. Tech often higher. Retail/restaurants lower but still healthy at 3-5%.
Why care about all three margins?
Reveals where money goes. Low gross margin = pricing/cost problem. Low operating margin = bloat. Low net margin = financial structure issues.
Estimates for planning only. Real margins depend on how you classify each cost, accounting method, one-time items and timing. Use your accountant's statements for decisions.