Business

Profit Margin Calculator

Measure profit margin from revenue and total costs to see how much of each sales dollar is left as profit.

Last reviewed: April 30, 2026Free toolMethodology

Profit Margin Calculator

These fields start with sample inputs. Keep them or replace them, then run the tool to show a fresh result.

Number fields accept plain values and common formatted input such as 250000, 250,000, or 1,234.56.

Result

Calculating the sample result.

Why it matters

Profit margin gives a cleaner picture of overall business efficiency than revenue alone because it captures how much value is retained after costs are covered.

When to use

  • Reviewing profitability by product line or client account
  • Stress-testing planned cost increases
  • Benchmarking different channels or business models

Inputs & Outputs

Inputs

  • Revenue is the total sales amount for the period or transaction.
  • Total costs include direct and operating costs tied to the revenue being measured.

Outputs

  • Profit margin percentage shows the share of revenue kept as profit.
  • Net profit shows the absolute residual after costs.

Profit margin method

Subtract total costs from revenue to find net profit, then divide net profit by revenue to express it as a percentage.

Profit margin = ((revenue - total costs) / revenue) x 100

Worked example

1

Service line review

A service package produces 90,000 in revenue and 72,000 in total costs.

Inputs

  • Revenue: 90,000
  • Total costs: 72,000

Steps

  • Net profit = 90,000 - 72,000 = 18,000
  • Margin = 18,000 / 90,000 = 20%

Result

  • The package operates at a 20% profit margin.

Edge cases & caveats

  • Margins become misleading if fixed corporate costs are allocated inconsistently.
  • Use the same cost rules across comparisons to avoid false conclusions.

Frequently Asked Questions

How is profit margin different from gross margin?

Gross margin only subtracts direct costs. Profit margin goes further by including operating costs, so it is usually lower.

Can profit margin be negative?

Yes. If total costs exceed revenue, the result is a negative margin and the activity is losing money.

Keep going

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