What is a good profit margin?

Good profit margins vary by industry: - Net margins of 20%+ are excellent - 10-20% is good - 5-10% is average - Below 5% may indicate pricing or cost issues Retail businesses typically have 2-5% net margins, while software/SaaS businesses may have 20-40% margins. Compare your margins to industry benchmarks for accurate assessment.

What is the difference between gross margin and net margin?

Gross Margin measures profitability after direct production costs (COGS), showing how efficiently you produce goods/services. Net Margin measures overall profitability after ALL expenses (COGS + operating expenses + other expenses), showing your true bottom-line profitability. Gross margin is always higher than net margin. A business can have strong gross margins but poor net margins if operating expenses are too high.

How can I improve my profit margins?

To improve profit margins: 1. Increase Revenue: Raise prices, upsell, cross-sell, improve marketing 2. Reduce COGS: Negotiate with suppliers, improve production efficiency, reduce waste 3. Cut Operating Expenses: Optimize staffing, reduce overhead, automate processes 4. Mix Optimization: Focus on higher-margin products/services 5. Volume: Increase sales volume to spread fixed costs Analyze which costs have the biggest impact and focus improvement efforts there.

What counts as Cost of Goods Sold (COGS)?

COGS includes direct costs to produce goods or deliver services: - Raw materials and supplies - Direct labor costs - Manufacturing overhead - Shipping/freight costs - Packaging materials COGS does NOT include: operating expenses (rent, admin salaries, marketing), interest, taxes, or depreciation. Only costs directly tied to production.

Why is my business profitable but I have no cash?

Profit and cash flow are different: - Profit is calculated on accrual basis (revenue when earned, expenses when incurred) - Cash flow tracks actual money in/out Reasons for profit without cash: - Customers haven't paid yet (accounts receivable) - You've paid suppliers early (accounts payable) - You've invested in inventory or equipment - Loan principal payments (not counted as expenses) Use both profit margin analysis AND cash flow management for financial health.

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Profit Margin Calculator

Calculate gross and net profit margins from your revenue and costs. Analyze business profitability with detailed breakdowns.

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How to Use Profit Margin Calculator

How to Use the Profit Margin Calculator:

Select your preferred currency (optional - defaults to USD)
Enter your total Revenue (required)
Enter Cost of Goods Sold (COGS) - direct costs to produce goods/services
(Optional) Enter Operating Expenses - rent, salaries, utilities, marketing, etc.
(Optional) Enter Other Expenses - interest, taxes, depreciation, etc.
Results are calculated automatically as you type
View Gross Profit and Gross Margin percentage
View Net Profit and Net Margin percentage
Copy or share your results

The calculator provides:

Gross Profit = Revenue - COGS
Gross Margin % = (Gross Profit / Revenue) × 100
Net Profit = Revenue - COGS - Operating Expenses - Other Expenses
Net Margin % = (Net Profit / Revenue) × 100

Try the example scenarios for Retail, Service, or Manufacturing businesses to see typical margin structures.

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