Gross Profit Margin

Gross Profit Margin

Gross profit margin shows how efficiently a company converts revenue into profit at the production level. It excludes operating expenses, interest, and taxes — focusing purely on the revenue vs. direct production costs relationship.

The Formula

Gross Profit Margin = (Revenue − COGS) / Revenue × 100

Where COGS = Cost of Goods Sold.

Example

A retailer earns $500,000 in revenue and has a COGS of $320,000:

Gross Profit = $500,000 − $320,000 = $180,000 Gross Profit Margin = $180,000 / $500,000 × 100 = 36%

This means for every dollar of revenue, $0.36 remains after paying for goods.

Industry Benchmarks

• Software / SaaS: 60–80%
• Retail: 20–40%
• Manufacturing: 25–35%
• Restaurants: 60–70% (before labor)

Related Tools

• Margin Calculator — Calculate gross margin and markup instantly.
• Break-Even Calculator — Find the revenue needed to cover all costs.
• ROI Calculator — Measure return on a specific investment.