Profit Margin Calculator

Added

Calculate gross profit, gross margin %, net profit and net margin % from revenue and cost inputs.

Gross profit
Gross margin
Operating profit
Operating margin
Net profit
Net margin
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~2 min read

Profit margin is one of the most fundamental metrics in any business, but the terminology trips people up: gross margin, net margin, and operating margin all measure profitability at different points in the income statement.

Gross Profit = Revenue − Cost of Goods Sold (COGS) Gross Margin % = (Gross Profit ÷ Revenue) × 100

Operating Profit = Gross Profit − Operating Expenses (salaries, rent, marketing) Operating Margin % = (Operating Profit ÷ Revenue) × 100

Net Profit = Operating Profit − Interest − Taxes Net Margin % = (Net Profit ÷ Revenue) × 100

For SaaS businesses, gross margin is especially important because it directly feeds into LTV calculations (LTV = ARPU × Gross Margin % ÷ Churn Rate). SaaS businesses typically target 70–80%+ gross margins; software with high hosting or third-party API costs can see 50–65%.

How to use the profit margin calculator

  1. Enter revenue, COGS, and operating expenses.
  2. Optionally add taxes and interest to compute net profit.
  3. Each margin level is shown as a dollar amount and a percentage.

Frequently asked questions

What's a good gross margin for a SaaS business? 70–80% is standard for cloud SaaS. Below 50% often signals high infrastructure costs or a services-heavy revenue component that makes scaling harder. Above 80% is achievable for pure software products with efficient hosting.

Why is gross margin more useful than revenue for valuing a SaaS company? Because revenue growth is meaningless if COGS grows at the same rate. A SaaS company generating $1M ARR at 80% gross margin is worth significantly more than one at $1M ARR with 30% gross margin, since the former has $800k to cover operating expenses and profit, while the latter has only $300k.

Is it possible to have positive gross margin and negative net margin? Yes, and it's common in growth-stage startups: the product earns more than its direct costs, but sales, marketing, and R&D spending exceeds gross profit. This is deliberate "invest now, profit later" — sustainable only if unit economics (LTV:CAC) are healthy.

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