Gross Margin Calculator
A gross margin calculator turns two numbers, your revenue and the direct cost of what you sold, into your gross profit and your gross margin percentage. Enter both below and press Calculate. It also shows markup, which is a different number that people often mix up. Nothing you type is stored.
Gross margin calculator formula
Gross profit is revenue minus the direct costs of what you sold, often called cost of goods sold. Gross margin is gross profit divided by revenue, shown as a percentage. It tells you how much of each sales dollar is left to pay for everything else in the business.
Margin and markup are not the same
Markup is gross profit divided by cost, not by revenue. For example, a product that costs $1 and sells for $2 has a markup of one hundred percent but a gross margin of fifty percent. Mixing them up can lead to prices below what was intended.
What counts as cost of goods sold
Direct materials, direct labor on the work you sell and costs that vary with each sale usually count. Rent, office staff and software usually sit below gross profit. Where a cost belongs depends on your business and how your books are set up, so use the same treatment each period. See our guides to what gross margin is and reading a profit and loss statement, or our management reporting and fractional controller pages.
This is an estimate for planning, not financial, tax or investment advice.
Need this done for you? See our Fractional Financial Controller service, or pricing. English Oak Financial does not prepare tax returns, perform audits or give investment advice. This guide is general information, not tax, legal or investment advice.
Common questions
What is a good gross margin?
It depends heavily on the industry, so compare against your own past periods and similar businesses rather than a single target number.
What is the difference between gross margin and net margin?
Gross margin only removes direct costs. Net margin removes all costs, including overhead, interest and tax.
Is my data saved?
No. The calculation runs in your browser and nothing you type is stored or sent anywhere.
How do you calculate gross margin dollars?
Gross margin dollars are the gross profit: revenue minus the direct costs of what you sold. Dividing that by revenue gives the gross margin percentage.
Talk it through with us
Schedule a free introductory consultation. No surprise bills. No unnecessary services.
Schedule Consultation