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How to Use This Gross Margin Calculator
Enter your total revenue and your total cost of goods sold. Then click calculate to see your gross profit and gross margin percentage.
- Enter your revenue.
- Enter your cost of goods sold.
- Click Calculate.
- Review your gross profit and gross margin.
This is useful for checking whether your core pricing and product costs are healthy before other business expenses are considered.
Gross Margin Formula
Gross Margin % = (Gross Profit ÷ Revenue) × 100
Gross margin shows the percentage of revenue left after subtracting direct costs. It helps you understand the efficiency of your product pricing and delivery costs.
Example Gross Margin Calculation
Imagine your revenue is $10,000 and your cost of goods sold is $6,500.
- Revenue: $10,000
- COGS: $6,500
- Gross Profit: $3,500
- Gross Margin: 35%
This means 35% of your revenue remains after direct product costs are subtracted.
What Is Gross Margin?
Gross margin is the percentage of revenue left after subtracting cost of goods sold. It is one of the clearest ways to see whether the core economics of what you sell are working.
Gross margin is especially useful for product-based businesses, ecommerce stores, wholesalers, manufacturers, and any business where direct costs are a major part of the pricing model.
Gross Margin vs Profit Margin
Gross margin includes only direct costs or cost of goods sold. Profit margin includes all business expenses, such as overhead, salaries, rent, software, and taxes.
That means a business can have a healthy gross margin but still poor overall profit if operating expenses are too high. To compare overall profitability, use the Profit Margin Calculator.
Gross Margin vs Markup
Gross margin is based on revenue, while markup is based on cost. They are related, but they are not the same percentage.
For pricing decisions based on cost, use the Markup Calculator or read the Margin vs Markup Guide.
Why Gross Margin Matters
- It shows whether your core pricing is strong enough.
- It helps identify weak product profitability early.
- It makes it easier to compare products or periods.
- It supports better pricing and sourcing decisions.
- It is a key part of overall profitability analysis.
Related Calculators and Guides
Frequently Asked Questions
How do you calculate gross margin?
Gross margin is calculated as (Revenue − Cost of Goods Sold) ÷ Revenue × 100.
What is a good gross margin?
A good gross margin depends on the industry. Many product-based businesses aim for around 40–60%, while retail often operates at lower margins.
What is the difference between gross margin and profit margin?
Gross margin includes only cost of goods sold. Profit margin includes all expenses such as rent, salaries, software, marketing, and taxes.
What is gross profit?
Gross profit is revenue minus cost of goods sold. It shows how much money remains before operating expenses are subtracted.
Why is gross margin important?
Gross margin is important because it shows whether your product pricing and direct costs are healthy before overhead and other business expenses are included.