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Profit Margin
Calculator
Calculate your gross and net profit margins instantly. Understand where your revenue goes and how your business compares to industry benchmarks.
Why track profit margins?
Profit margin is the single most important number in your business. It tells you whether you're actually making money — not just generating revenue. Many businesses are busy and growing but barely profitable because their margins are too thin to survive a slow month or unexpected expense.
Tracking your gross and net margin monthly gives you the clarity to make pricing decisions, control costs, and know exactly when you can afford to hire, invest or expand.
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What is profit margin and why does it matter?
What is gross profit margin?
Gross profit margin measures how much revenue remains after subtracting the direct costs of producing your product or service (COGS). A high gross margin means your core business model is efficient. Most service businesses should aim for a gross margin of 50–70%. Product businesses typically run 30–50%.
What is net profit margin?
Net profit margin is what's left after subtracting all expenses — COGS, operating costs, payroll, rent, software, and everything else. It's the truest measure of business profitability. A net margin above 10–15% is considered healthy for most small businesses. Below 5% is a warning sign worth investigating.
How do I improve my profit margin?
Profit margins improve through three levers: increasing prices, reducing direct costs (COGS), or cutting operating expenses. Most businesses focus on revenue growth while ignoring margin — but a 5% reduction in expenses can have the same effect as a 20% increase in sales. Clean bookkeeping is the first step to knowing which lever to pull.
What's a good profit margin for a small business?
It depends on the industry. Retail businesses typically see 2–5% net margins. Service businesses like consulting, bookkeeping, and coaching often reach 15–30%. Restaurants average 3–9%. If you don't know your industry benchmark, you can't tell if your margin is competitive or if something is wrong.
Why is my revenue up but profit is flat?
This is one of the most common problems in small business — revenue grows but profit stays the same or shrinks. It usually means expenses are growing faster than revenue, margins are being eroded by discounting, or hidden costs are being missed. A bookkeeper can identify exactly where the leak is.
How often should I calculate my profit margin?
At minimum, monthly. Quarterly is too slow to catch problems early. With clean books and a good bookkeeping system, your profit margin should be visible in real time — not something you calculate once a year at tax time. S&C Bookkeeping provides monthly P&L reports so you always know your margins.