Gross Margin Calculator: Analyze Your Business Profitability Instantly
Gross margin shows what share of each sales dollar you keep after direct costs—U.S. retailers average 23.5% (Damodaran, 2023). This calculator subtracts COGS and optional direct expenses from revenue, then divides the result by revenue to reveal both gross profit and gross-margin %. Just enter your numbers and read the instant verdict.
Results
Gross Profit:
Gross Margin:
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How to use the tool
Enter revenue – e.g., $325,000 or $2,350,000.
Add COGS – e.g., $220,000 or $1,400,000.
Optional direct expenses – e.g., $12,500 or $45,000.
Hit “Calculate” to display gross profit and gross-margin %.
Gross margin is the percentage of sales revenue left after paying for the product or service’s direct costs — “the money left over after paying for goods sold” (Investopedia, 2023).
How does this calculator work?
You enter revenue, COGS and optional direct expenses. The script subtracts costs to find gross profit, divides by revenue, then multiplies by 100 to produce gross-margin % — all in your browser, no data stored.
Does gross margin include rent, marketing or salaries?
No. Those fall under operating expenses. Gross margin considers only costs directly tied to production, matching the IRS definition of COGS (IRS Pub 334, 2023).
What is a “good” gross margin?
Benchmarks vary: U.S. retail averages 23.5 % while mature SaaS firms aim for 70 % or higher (Bessemer Cloud Index, 2023).
How can I improve my margin?
Raise prices, negotiate supplier discounts, automate manufacturing, or reduce waste. McKinsey found lean initiatives lift manufacturing margins by 3-5 points (McKinsey Operations Practice, 2022).
Is the tool suitable for service businesses?
Yes. Replace COGS with direct labor and subcontractor fees to compute service gross margin, the metric investors track for professional-services firms (PwC Global Services Report, 2022).
Can I model “what-if” scenarios?
Change any field and recalculate instantly. This lets you test pricing or cost changes in seconds without spreadsheets.
Why use gross margin over net profit?
Gross margin isolates production efficiency. Net profit includes overhead, taxes and financing, which can obscure manufacturing or delivery cost issues (FASB Statement 220, 2021).
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