Calculate gross margin percentage, gross profit, and markup from revenue and COGS. Includes reverse calculations, industry benchmarks, and markup-to-margin conversion.
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Gross margin is calculated by subtracting the Cost of Goods Sold (COGS) from revenue, then dividing by revenue and multiplying by 100. Use our gross margin calculator to instantly find gross profit, gross margin percentage, and markup — or work backwards to find the revenue or COGS needed to hit a target margin.
Gross margin is the percentage of revenue remaining after subtracting the direct costs of producing your goods or services (COGS). It measures how efficiently a company generates profit from each dollar of revenue before accounting for operating expenses, interest, and taxes. A higher gross margin means more money available to cover overhead and generate net profit.
Gross Margin Formula
Calculate margin from revenue and COGS, find required revenue for a target margin, find maximum allowable COGS, or convert between markup and margin — all in one tool.
Compare your gross margin against industry averages for SaaS, e-commerce, grocery, manufacturing, restaurants, and consulting with one click.
Markup and gross margin are often confused. Our calculator automatically shows both, and includes a dedicated converter so you always know which you're working with.
Use reverse calculation modes to set prices or control costs strategically — ensuring you hit your target gross margin before launching a product.
Determine what price to charge for a product given your manufacturing cost and desired gross margin.
Compare your gross margin to industry benchmarks to assess whether your cost structure is competitive.
Work backwards from a revenue forecast and target margin to find the maximum you can spend on COGS.
Convert between markup and margin to ensure sales reps price deals consistently with company targets.
Calculate gross margins for multiple business units or product lines to identify the most profitable segments.
A 'good' gross margin depends heavily on your industry. SaaS and software companies typically achieve 65–80%, consulting firms 50–70%, and restaurants 60–70%. Retailers and manufacturers often see 20–40%. Compare your gross margin to your industry benchmark rather than a single universal number.
Gross margin is calculated as a percentage of revenue: (Revenue - COGS) / Revenue × 100. Markup is calculated as a percentage of cost: (Revenue - COGS) / COGS × 100. A 50% markup equals a 33.3% gross margin. They measure the same profit dollars but from different bases.
COGS includes all direct costs tied to producing your product or service: raw materials, direct labor, manufacturing overhead, packaging, and shipping. It does NOT include operating expenses like marketing, rent, or salaries for non-production staff — those are subtracted after gross profit.
You can improve gross margin by increasing prices (if demand is inelastic), reducing COGS through supplier negotiation or process efficiency, shifting product mix toward higher-margin items, or reducing waste and returns.
Gross margin only accounts for COGS. Net margin subtracts all expenses — COGS, operating expenses, interest, taxes — from revenue. A business can have a healthy 60% gross margin but a low or negative net margin if operating costs are high.
Yes. A negative gross margin means your COGS exceeds your revenue — you are losing money on every unit sold before even accounting for overhead. This is a critical warning sign that requires immediate pricing or cost restructuring.
Analysts use gross margin to assess operational efficiency, compare companies within an industry, and track trends over time. A declining gross margin may signal rising input costs, competitive pricing pressure, or a shift in product mix.