Finance 2026-05-03 4 min read By Konvertibly Team

Profit Margin Calculator: Gross, Net, and Operating Margin Explained

Learn how to calculate gross, operating, and net profit margins — what each measures, how they differ from markup, and benchmarks by industry.

Profit Margins: What Each Type Measures

Profit margin expresses profit as a percentage of revenue. Different types of margin reveal different layers of efficiency — from raw production costs to the bottom-line after all expenses.

Gross Profit Margin

Gross Margin = [(Revenue − COGS) ÷ Revenue] × 100
COGS = Cost of Goods Sold (direct production costs only)

Example: Revenue £500k, COGS £200k → Gross Margin = 60%

Operating Profit Margin (EBIT Margin)

Operating Margin = [EBIT ÷ Revenue] × 100
EBIT = Earnings Before Interest and Tax
     = Gross Profit − Operating Expenses (rent, salaries, marketing)

Net Profit Margin

Net Margin = [Net Profit ÷ Revenue] × 100
Net Profit = Revenue − All costs including interest and tax

Industry Margin Benchmarks

Software/SaaS: Gross 70–80% | Net 10–25%
Retail: Gross 25–50% | Net 2–5%
Restaurant: Gross 60–70% | Net 3–9%
Manufacturing: Gross 25–35% | Net 5–10%
Financial services: Gross 80–90% | Net 15–30%

Margin vs Markup: The Critical Difference

Margin = Profit ÷ Revenue
Markup = Profit ÷ Cost

Cost £60, sell for £100:
Margin = (100−60)÷100 = 40%
Markup = (100−60)÷60 = 66.7%

A 40% margin is not the same as a 40% markup. Confusing the two causes significant pricing errors.

Calculate your profit margin: Free Profit Margin Calculator