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TinyBizTools

Gross Margin Calculator

Calculate gross margin percentage, gross profit, and effective markup instantly. Free gross margin calculator with industry benchmarks — no signup required.

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Ready to calculate

Enter your revenue and cost of goods sold to see your gross margin and industry comparison.

How to Use This Gross Margin Calculator

  1. Enter your revenue — the total sales income for the period you want to analyze.
  2. Enter your cost of goods sold (COGS) — the direct costs of producing or purchasing the goods you sold.
  3. See your results instantly — gross margin %, gross profit, effective markup %, and how you compare to industry benchmarks.

The calculator auto-calculates as you type and includes a visual industry benchmark comparison so you can see where you stand.

The Formula

Gross Profit = Revenue - COGS
Gross Margin % = (Gross Profit / Revenue) × 100
Effective Markup % = (Gross Profit / COGS) × 100

Example: Your business earns $50,000 in revenue with $30,000 in COGS:

  • Gross Profit = $50,000 - $30,000 = $20,000
  • Gross Margin = $20,000 / $50,000 = 40%
  • Effective Markup = $20,000 / $30,000 = 66.67%

Gross Margin vs. Net Margin

These are related but very different metrics:

Gross MarginNet Margin
What it measuresRevenue after direct costs (COGS)Revenue after all costs
Formula(Revenue - COGS) / Revenue(Revenue - All Expenses) / Revenue
IncludesMaterials, direct labor, manufacturingCOGS + rent, salaries, marketing, taxes
Typical range25–85% (varies by industry)5–20% for most businesses
What it tells youProduction/purchasing efficiencyOverall business profitability

A healthy gross margin with a low net margin means your operating costs (rent, salaries, marketing) are eating into profitability — not your product costs.

Industry Benchmarks

IndustryGross Margin RangeNotes
Retail25–50%Grocery lower (~25%), specialty higher (~50%)
Manufacturing25–35%Heavy industry at the low end
Software / SaaS70–85%Highest margins due to low marginal cost
Restaurants60–70%Food cost is typically 28–35% of revenue
Services50–70%Consulting and professional services

If your gross margin falls below the typical range for your industry, investigate whether your pricing is too low, your supplier costs are too high, or your production process is inefficient.

Frequently Asked Questions

What is gross margin?
Gross margin is the percentage of revenue that remains after subtracting the cost of goods sold (COGS). It tells you how much of every dollar in sales your business keeps before paying operating expenses, taxes, and interest. A 40% gross margin means you keep $0.40 from every $1 of revenue.
Gross Margin % = ((Revenue - COGS) / Revenue) x 100. For example, if your revenue is $100,000 and COGS is $60,000, your gross margin is (($100,000 - $60,000) / $100,000) x 100 = 40%.
It depends on your industry. Software companies typically see 70-85%, restaurants 60-70%, retail 25-50%, manufacturing 25-35%, and services 50-70%. Compare your margin to your specific industry benchmarks rather than a universal number.
Gross margin is profit as a percentage of revenue (selling price). Markup is profit as a percentage of cost. A 50% margin means half of revenue is profit. A 50% markup means you added half the cost as profit. For the same transaction, markup is always a higher number than margin.
Yes. A negative gross margin means your COGS exceeds your revenue — you are losing money on every sale before even accounting for operating expenses. This requires immediate attention: either raise prices or reduce production costs.
You can improve gross margin by increasing prices, negotiating lower supplier costs, reducing production waste, improving manufacturing efficiency, focusing on higher-margin products, or reducing freight costs. Even small improvements in gross margin can have a large impact on profitability.

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