Profit Margin Calculator

Want to make sure your products or services are priced right? Use this simple gross profit margin formula or calculator to see your potential gross profit margin.

Gross Profit Margin = Gross Profit / Sales Price x 100

* Required Field

* Markup %

* Cost of Product/Service

Profit Margin Calculator Results

Gross Profit Margin

Sales Price

Gross Profit

Understanding Profit Margin

What is profit margin?

A profit margin is the percentage of money your business makes from selling its products and/or services after deducting certain costs. Gross profit margin tells you how much profit you have left after paying for the products or services you sell. Net profit margin tells you how much profit you have left after paying all costs of running your business. The higher the percentage, the more profitable your business is.

What is the difference between gross profit margin and net profit margin?

Gross profit margin is the percentage you make from an item after deducting production costs, also known as cost of goods sold (COGS). Net profit margin is how much you make after deducting all other expenses, such as operational costs, taxes and more.

What are the benefits of calculating my profit margin?

There are several benefits to calculating your profit margin:

Know how your product/service pricing compares in your industry
Better understand the impact of rising production costs on your business
Use it as a benchmark for future growth
Help inform your pricing strategy
Better manage your cash flow
Provide information your bank or investor may want to know

What is a good gross profit margin?

What’s considered a good gross profit margin varies from product to product, business to business and industry to industry. If you are able to do market research on other businesses in your industry, you may be able to get a general idea to help inform your pricing strategy.

What is an example of a gross profit margin calculation?

Say it costs $6 to produce a box of gourmet popsicles and you want a 50% markup. Your sales price would need to be $9, giving you a $3 gross profit and a 33.33% gross profit margin:

$3 (Gross Profit)/$9 (Sales Price) x $100 = 33.33% Gross Profit Margin

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Profit Margin FAQs

Why is net profit margin important?

Net profit margin signifies how much you are making after all costs—including production and operational expenses—are deducted. If you have a low net profit margin, you may need to adjust your pricing to ensure your business is bringing in enough income to cover costs, ensure financial stability, enjoy growth and more.

How do I calculate gross profit margin?

To calculate your gross profit margin, use this formula: (Gross Profit / Sales Price) x 100 = Gross Profit Margin

Is gross profit margin more important than net profit margin?

Both numbers are valuable to know and can help you better understand the financial health of your business.

Your gross profit margin can be used to help you keep track of your business’s performance over time, see how you compare to others in the same industry and stay on top of the impact of rising production costs.

Your net profit margin can also help with these things, but takes operational costs into account as well. It’s shown as a percentage and is an indicator of the well-being of your business.

How can I improve my profit margin?

There are a few things you can do to improve your profit margin:

Revisit your pricing strategy to see if you need to adjust any numbers or choose a different approach
Offer extras that the competition doesn’t such as guarantees, delivery, more expertise and better after-sales support—which could help you justify a higher selling price
Lower your overhead and improve efficiency by doing things like renting out extra space or machinery you don’t use daily
Reduce input costs such as raw materials, staff, or inventory without impacting quality
Find ways to sell more products to help distribute operating costs across more sales

Legal Disclaimer †

Any recommendations are based on the accuracy and completeness of the information provided and are for illustrative and general information purposes only. This tool is not intended to provide specific financial, investment or other advice, and should not be relied upon in that regard. Royal Bank of Canada uses reasonable efforts to include accurate and up-to-date information in this tool, but cannot guarantee that all information is accurate, complete, or current at all times. Royal Bank of Canada does not make any express or implied warranties or representations with respect to any information or results in connection with the Profit Margin Calculator tool. Royal Bank of Canada will not be liable for any losses or damages arising from any errors or omissions in any of the information or results, as well as any action or decision made by you in reliance on any information or results.

The calculations provided herein are based on the information and values provided by the user. These calculations are intended for informational purposes only and are designed to provide a general indication. It is important to note that the results are purely indicative and should not be considered as definitive or binding. These calculations should not be considered as professional advice.