Profit Margin Calculator
Calculate net profit margin, net profit and profit percentage from your cost and revenue.
Profit Margin Formula Reference
Profit margin formulas relate cost, revenue, net profit and profit percentage to each other.
| Metric | Formula | Example ($200 Revenue, $120 Cost) |
|---|---|---|
| Net Profit | Revenue minus Cost | $200 minus $120 = $80 |
| Net Profit Margin | Net Profit / Revenue x 100 | $80 / $200 x 100 = 40% |
| Profit Percentage | Net Profit / Cost x 100 | $80 / $120 x 100 = 66.67% |
| Revenue from Margin | Cost / (1 minus Margin) | $120 / 0.60 = $200 |
| Cost from Margin | Revenue x (1 minus Margin) | $200 x 0.60 = $120 |
How the Profit Margin Calculator Works
The profit margin calculator takes your cost and revenue and computes three key metrics: net profit, net profit margin, and profit percentage. These three numbers together tell you exactly how efficient your pricing and cost structure are.
Net Profit Margin Formula
Net profit margin equals net profit divided by revenue. Net profit is revenue minus cost. If your revenue is $200 and your cost is $120, net profit is $80 and net profit margin is 40%. This means 40 cents of every dollar in revenue becomes profit.
Profit Percentage Explained
Profit percentage is different from profit margin. Profit percentage uses cost as the denominator rather than revenue. In the same example above, profit percentage is $80 divided by $120, which equals 66.67%. Profit percentage is always higher than profit margin for the same sale.
Industry Net Profit Margin Benchmarks
Net profit margin benchmarks vary significantly by sector. Use these averages as a reference when evaluating your own results.
When Profit Margin Is More Useful
Use profit margin when comparing your business performance to industry benchmarks. Margin is expressed as a share of revenue, which makes comparisons across different sized businesses possible. A 20% margin means the same thing whether revenue is $10,000 or $10 million.
When Profit Percentage Is More Useful
Profit percentage is more useful when negotiating with suppliers or evaluating cost changes. It shows how many cents of profit you earn for every dollar spent on production or acquisition, making cost increase scenarios easier to model.
Frequently Asked Questions
Net profit margin equals net profit divided by revenue, multiplied by 100. Net profit is revenue minus cost. With $200 revenue and $120 cost, net profit is $80 and net profit margin is 40%.
Profit margin is net profit as a percentage of revenue. Profit percentage is net profit as a percentage of cost. Both use the same net profit but different denominators, so profit percentage is always higher than profit margin.
A 10% net margin is generally considered average, 20% is considered good, and above 20% is excellent. Software companies often exceed 20% while grocery and retail businesses typically run below 5%.
Revenue equals cost divided by (1 minus profit margin). For a $60 cost with a 25% target margin, Revenue = $60 divided by 0.75 which equals $80.
Net profit equals revenue minus cost. If revenue is $300 and cost is $210, net profit is $90. This is the amount earned after all costs are deducted from the selling price.