Gross Margin Calculator
See what share of revenue remains after direct costs (COGS)—before overhead.
Calculator
Direct costs to deliver the product or service—not all OpEx.
Results
Gross margin
55.00%
Gross profit
$55,000.00
What this means
Gross margin at 50%+ usually means strong unit economics before overhead—assuming COGS are defined cleanly.
Copy Summary to paste the write-up. Copy Link for the same numbers every time. No login, no setup—just copy and go.
Gross Margin Summary
Gross margin = (Revenue − COGS) ÷ Revenue. It measures how profitable each dollar of sales is before operating expenses.
Explanation
Gross profit is revenue minus cost of goods sold.
Gross margin is that profit as a percent of revenue.
Business implication: weak gross margin means scaling sales also scales losses in disguise—fix unit economics first.
Step-by-step example
Revenue $100,000, COGS $45,000:
- Gross profit: $55,000
- Gross margin: 55%
Formula
Gross profit = Revenue − COGS
Gross margin = Gross profit ÷ Revenue
Helpful tips
- Track gross margin by product to kill or reprice losers early.
- Payment processing fees sometimes belong in COGS for digital goods—stay consistent month to month.
FAQ
How is gross margin different from profit margin?
Gross margin uses only COGS (direct delivery costs). Profit margin typically includes operating expenses too. Gross margin shows product/unit economics; net margin shows overall business leftover.
What belongs in COGS?
Direct costs tied to delivering each sale—materials, manufacturing, or contractor delivery costs. Rent and most marketing usually sit below gross profit as operating expenses.
What is a healthy gross margin?
Product businesses often target higher gross margins to fund sales and overhead. Service businesses may book labor differently—define COGS consistently.
How accurate is this calculator?
It matches the numbers you enter. Classification of costs as COGS vs OpEx is an accounting judgment.
Related tools
Key terms
Gross margin
Definition. Revenue minus cost of goods sold (or direct delivery costs), often shown as a percentage of revenue.
In simple terms. Gross margin shows whether the core offer is priced above direct cost before overhead like rent, software, and marketing.
Gross margin % = (revenue − COGS) ÷ revenue
Example. Sell $10,000 of product with $4,000 COGS → $6,000 gross profit → 60% gross margin.
Common mistake. Stuffing all operating expenses into COGS (or leaving direct labor out) and misreading the business model.
Related calculators. Gross Margin Calculator, Profit Margin Calculator
Related terms. Profit margin, Break-even
Profit margin
Definition. Profit as a percentage of revenue—how much of each sales dollar remains after the costs you include.
In simple terms. Margin answers “is this business (or period) actually profitable?” Define costs the same way every time so comparisons mean something.
Profit margin = profit ÷ revenue (profit = revenue − costs)
Example. $20,000 profit on $100,000 revenue is a 20% profit margin.
Common mistake. Mixing personal draws, one-off investments, and operating costs without labeling what the margin includes.
Related calculators. Profit Margin Calculator, Gross Margin Calculator
Related terms. Gross margin, Break-even, ROI
Break-even
Definition. The sales level where contribution covers fixed costs—so profit is roughly zero.
In simple terms. Below break-even you lose money; above it, each incremental sale contributes more to profit (within capacity). Useful for pricing and capacity decisions.
Break-even units ≈ fixed costs ÷ (price − variable cost per unit)
Example. Fixed costs $5,000/month, $40 contribution per unit → break-even at 125 units.
Common mistake. Treating all costs as variable, or ignoring that break-even can shift when pricing or mix changes.
Related calculators. Break-Even Calculator
Related terms. Profit margin, Gross margin, Burn rate
Notes & Assumptions
Gross margin is a core income-statement metric used across product and retail businesses.
Last reviewed: July 2026