Gross Margin Calculator

Gross margin calculator for revenue, COGS, and pricing decisions

Gross margin is one of the fastest ways to tell if a product, service, or business model can work. It focuses on what you earn from sales after paying the direct costs required to deliver those sales, usually called cost of goods sold (COGS). This calculator turns two inputs, revenue and COGS, into the numbers people actually use to run a business: gross profit, gross margin percentage, and markup percentage.

To use it, enter your total revenue for a period and your total COGS for the same period. Revenue is the money you collected from customers before operating expenses like rent, salaries, admin software, advertising, and taxes. COGS is the direct cost of producing or purchasing what you sold, plus any direct fulfillment costs you treat as part of COGS. The calculator then shows gross profit, which is revenue minus COGS, and gross margin %, which is gross profit divided by revenue.

Why this matters: margin percentage makes businesses comparable. Two businesses can have very different prices and volumes, but margin shows how much of each revenue unit is available to pay overhead and still leave profit. If your gross margin is too low, you either need to raise prices, reduce direct costs, change what you sell, or change how you deliver it. If your gross margin is healthy, you have room for overhead, discounting, commissions, and growth.

This page also gives you markup %, which is a pricing view from the cost side. Markup is gross profit divided by COGS. Many people confuse margin and markup. They are not the same number. A 50% markup does not mean a 50% margin. If you are setting prices from costs, markup may feel more natural. If you are evaluating performance from sales, margin is the standard metric.

Use the results to answer practical questions. If you are reviewing monthly performance, compare gross margin month to month to see if cost pressures are eating into profitability. If you are planning discounts, you can estimate how a lower selling price impacts revenue and margin. If you are quoting a new job, gross margin helps you decide if the work is worth taking once direct costs are included. If your margin is negative, it means COGS is higher than revenue, so every sale increases your loss unless something changes.

For best accuracy, keep your inputs consistent. Use the same time period for revenue and COGS. Do not mix cash collected this month with inventory purchased last month unless that is how you track COGS. If your business uses inventory, your accounting COGS may differ from cash paid for stock because COGS is based on what you sold, not what you bought. That is normal. The goal is a useful gross margin number you can track and improve.

Gross margin is not the final profit. It does not include overhead and operating costs. A business can have a high gross margin and still lose money if overhead is too high. The opposite can also happen: a lower gross margin can still work if overhead is lean and volume is strong. Treat gross margin as a first filter for pricing and viability, then look at net profit once overhead is included.

Assumptions and how to use this calculator

• Revenue and COGS must be for the same period (same month, quarter, or project).
• COGS should include only direct costs needed to deliver what you sold, not general overhead.
• If COGS is higher than revenue, the calculator will show a negative gross profit and negative gross margin.
• Margin % is based on revenue; markup % is based on COGS. They answer different questions.
• Results are shown as plain amounts plus percentages; you decide which currency the amounts represent.

Common questions

What is gross margin?

Gross margin is the percentage of revenue left after subtracting COGS. It is calculated as (Revenue − COGS) ÷ Revenue. It tells you how much of each revenue unit is available to cover operating expenses and profit.

What is gross profit?

Gross profit is the money left after direct costs: Revenue − COGS. It is an amount, not a percentage, and it is useful for budgeting overhead and planning how much the business can spend while staying profitable.

What is the difference between margin and markup?

Margin uses revenue as the base: Gross Profit ÷ Revenue. Markup uses COGS as the base: Gross Profit ÷ COGS. They are different views, and the same deal will always show a higher markup than margin.

Is gross margin the same as net profit margin?

No. Gross margin ignores operating expenses like salaries, rent, admin tools, marketing, interest, and taxes. Net profit margin includes all expenses. Use gross margin to evaluate pricing and direct costs, and use net margin to evaluate the whole business.

What is a “good” gross margin?

There is no universal number. It depends on industry, competition, and your overhead structure. The practical test is whether your gross margin leaves enough room to pay overhead and still generate acceptable profit at realistic sales volumes.