Work out gross margin and gross profit from revenue and COGS, compare it with your industry's published margin, and solve for a target margin.
Revenue and COGS for the same period — a month, a quarter or a year.
Optional. Pick the closest sector and the result is compared with its published gross margin; skip it and you still get every figure.
NYU Stern (Damodaran), "Margins by Sector (US)", January 2026 — 5,994 US-listed firms; all-market aggregate 37.76%. These are public companies, aggregated by sector, so read them as a reference point rather than as a peer group.
| Industry | Gross margin |
|---|---|
| Software (System & Application) | 71.72%309 firms |
| Software (Internet) | 62.58%29 firms |
| Hotel/Gaming | 60.85%63 firms |
| Apparel | 56.88%35 firms |
| Healthcare Products | 54.00%204 firms |
| Household Products | 51.04%110 firms |
| Education | 45.82%32 firms |
| Entertainment | 41.39%92 firms |
| Recreation | 39.79%49 firms |
| Machinery | 37.47%105 firms |
| Advertising | 36.24%52 firms |
| Retail (Special Lines) | 35.30%94 firms |
| Business & Consumer Services | 33.38%155 firms |
| Retail (General) | 33.18%23 firms |
| Restaurant/Dining | 32.24%64 firms |
| Building Materials | 30.94%41 firms |
| Furn/Home Furnishings | 30.28%27 firms |
| Electronics (General) | 26.76%114 firms |
| Retail (Grocery and Food) | 26.31%15 firms |
| Construction Supplies | 25.52%40 firms |
| Computer Services | 24.26%64 firms |
| Food Processing | 23.23%78 firms |
| Trucking | 21.19%26 firms |
| Auto Parts | 15.84%35 firms |
| Engineering/Construction | 15.46%48 firms |
| Food Wholesalers | 15.44%13 firms |
| Farming/Agriculture | 13.09%35 firms |
| Healthcare Support Services | 12.08%104 firms |
Industry figures are aggregates for US-listed public companies and are provided for comparison only. They are not a target, a valuation, or accounting advice. Your own COGS definition determines your margin — check it with your accountant before acting on a comparison.
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Gross margin is the share of every sales dollar left after the direct cost of what you sold. It is the first line of defence in a business: everything else — rent, salaries, marketing, interest, tax — is paid out of it. This calculator works out that margin from your revenue and COGS, then compares it against the published gross margin for your industry, so the number arrives with a reference point instead of an adjective. It also runs the calculation backwards: tell it a target margin and it returns the revenue that cost base needs to support, or the most you can spend on COGS and still hit it.
Gross margin is gross profit expressed as a percentage of revenue, where gross profit is revenue minus the cost of goods sold. COGS covers the costs that vary directly with what you sell — materials, the goods themselves, the labour used to produce or deliver them, freight in. It excludes overhead that would continue if you sold nothing: office rent, admin salaries, marketing, insurance. A 40% gross margin means 40 cents of each sales dollar remains to cover all of that and leave a profit. Because the boundary between direct and indirect cost is a judgement, the same business can report two different gross margins under two accounting conventions — which is why the figure is compared within an industry rather than across the economy.
Gross margin formula
Work out the margin a proposed price produces, and whether it clears what your sector typically earns before you commit to it.
Separate a volume problem from a margin problem. Falling revenue at a stable margin is a demand issue; stable revenue at a falling margin is a cost or discounting issue.
Given the cost base you already have, find the revenue that reaches a 40% margin — or given your revenue, the most COGS can be.
Convert a new unit cost into the margin it would produce and compare it directly against your current one.
Bring the margin and its industry comparison to the meeting rather than deriving it in the room.
Operating margin and net margin are gross margin minus more costs. No amount of overhead discipline can produce a net margin higher than the gross margin above it, so a structural problem here cannot be fixed downstream.
A margin that erodes while volume holds usually means discounting, rising input costs, or a mix shift toward cheaper products. All three show up here months before they reach the bottom line.
A 30% gross margin is thin for software and healthy for a grocer. Comparing against the published figure for your own sector is the difference between a benchmark and a guess.
Customer acquisition, salaries and rent are all paid out of gross profit. Knowing the margin tells you how many dollars of revenue each dollar of overhead requires.
Gross margin and its trend are standard in credit files and in diligence, because they describe the business model itself rather than one year's cost control.
There is no single answer, and any tool that gives you one is grading software and groceries on the same scale. Against NYU Stern's January 2026 dataset of 5,994 US-listed firms, the all-market aggregate is 37.76% — but system and application software runs 71.72%, restaurants 32.24%, grocery retail 26.31% and auto parts 15.84%. Compare within your sector; the industry table on this page lists 28 of them.
They measure the same profit against different bases. Margin is profit divided by the selling price; markup is profit divided by cost. An item costing $60 and selling for $100 carries a $40 profit, which is a 40% margin and a 66.7% markup. Confusing the two is the most common pricing error in retail: applying a 40% markup when you meant a 40% margin leaves you 11.4 points short.
Costs that vary directly with what you sell: raw materials, purchased goods, inbound freight, and the labour used to produce or deliver the product. Overhead that continues whether or not you sell — admin salaries, office rent, marketing, insurance, depreciation on head-office assets — belongs below the gross profit line. Service businesses often include the salaries of delivery staff and exclude everyone else.
No. Gross profit is a dollar amount — revenue minus COGS. Gross margin is that amount as a percentage of revenue. A business can grow gross profit while its margin falls, which is exactly what happens when it buys volume with discounts.
Yes, and it is a serious finding rather than a rounding issue. A negative gross margin means each sale costs more to fulfil than it brings in, so higher volume deepens the loss. It usually points to underpricing, a supply cost shock, or inventory written down below its selling price.
Three usual reasons. First, the COGS boundary: if you include costs your sector's filers put below the line, your margin reads low. Second, scale — the published figures aggregate large public companies, which buy better than a small business does. Third, mix: a sector average blends product lines your business may not carry.
Only three levers exist: raise price, lower unit cost, or shift mix toward higher-margin lines. Volume alone does not move the percentage, though it can lower unit costs through purchasing power. Because the margin is a ratio, a 5% price rise moves it far more than a 5% volume rise does.
Divide your COGS by 0.60. A $150,000 cost base needs $250,000 of revenue for a 40% gross margin. The "Revenue for a target" mode on this calculator does that and shows the working, including the check that the result really does come back to your target.
Aswath Damodaran of NYU Stern, "Margins by Sector (US)", updated January 2026, covering 5,994 US-listed firms. Gross margin is aggregated per sector rather than averaged per firm, so a few large companies influence the figure. It is a public reference point, not a survey of small businesses.
Monthly, at the same cadence as your P&L, and always for the same period on both sides of the ratio. The trend matters more than any single reading — a margin drifting down by half a point a month is a bigger finding than one that sits two points below a sector average.