How to Calculate Profit Margin

Profit margin is one of the most important metrics for measuring a business's profitability. It represents what percentage of revenue has turned into profit. Our calculator makes it easy, but understanding the formula is key for any business owner or entrepreneur.

The Profit Margin Formula

The calculation is a two-step process:

1. Calculate Net Profit: Subtract your cost of goods sold from your revenue. Net Profit = Revenue - Cost.
2. Calculate the Margin: Divide your net profit by your revenue, and then multiply by 100 to get the percentage. Profit Margin = (Net Profit / Revenue) * 100.

For example, if your revenue is $120 and your cost is $50, your net profit is $70. Your profit margin would then be ($70 / $120) * 100 = 58.33%. Our calculator provides a quick and error-free way to determine your profitability, helping you make informed decisions about pricing, cost management, and business strategy.