Profit Margin Calculator

Calculate gross margin, net margin or markup from revenue and costs. Understand what percentage of your revenue is actual profit.

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Gross Margin vs Net Margin

Gross profit margin measures profitability before operating expenses — just revenue minus cost of goods sold (COGS). Net profit margin deducts everything: COGS, salaries, rent, utilities, taxes. A business might have a 60% gross margin but only a 12% net margin after overhead. Both figures matter: gross margin measures product pricing efficiency; net margin measures overall business efficiency.

Markup vs Margin — The Confusion

These are not the same number. Markup is the percentage added to cost. Margin is the percentage of the selling price that is profit. A 50% markup on a ₦10,000 cost item gives a selling price of ₦15,000 — but the gross margin is 33.3% (₦5,000/₦15,000). Confusing them leads to systematic pricing errors.

Frequently Asked Questions

It depends heavily on the industry. Retail typically runs 5-20% net margin. Software/tech can reach 20-40%. Food services often achieve only 3-9% net. Manufacturing varies widely. A gross margin above 50% is generally healthy for most product businesses. Compare against your industry benchmark rather than a universal standard.
Gross Profit Margin = (Revenue - COGS) / Revenue × 100%. Example: Revenue ₦500,000, COGS ₦200,000. Gross profit = ₦300,000. Gross margin = 300,000/500,000 × 100% = 60%. This means 60 kobo of every naira of revenue is gross profit before operating costs.
Markup = (Selling Price - Cost) / Cost × 100%. Example: cost ₦3,000, selling price ₦4,500. Markup = 1,500/3,000 × 100% = 50%. To convert markup to margin: Margin = Markup / (1 + Markup). 50% markup = 50/(1+0.50) = 33.3% margin.
COGS (Cost of Goods Sold) is the direct cost to produce or purchase the goods sold in a period. For a retailer it is wholesale purchase price. For a manufacturer it includes raw materials, direct labour and manufacturing overhead. It excludes rent, marketing, admin salaries and other indirect costs.
A negative margin means the business is losing money — costs exceed revenue. Temporarily negative margins can be a strategy for startups gaining market share, but sustained negative margins require either cutting costs or increasing prices. Understanding where the losses occur (gross vs net level) tells you whether it is a pricing problem or an overhead problem.

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