Formula
Profit margin = (Revenue − Costs) ÷ Revenue × 100Profit margin formula
Subtract costs from revenue to find profit, then divide profit by revenue. Revenue of $50,000 and costs of $35,000 produce $15,000 profit and a 30% margin.
Choose the correct cost level
Using cost of goods produces gross margin. Adding operating expenses produces operating margin. Including interest and taxes moves toward net margin. Label the result so readers know which costs are included.
Margin is not markup
Margin divides profit by selling price or revenue; markup divides the same profit by cost. They produce different percentages from identical transactions.
Assumptions
- Revenue and costs use the same accounting scope.
Sources and methodology
CalcMotive publishes the formula and assumptions so you can decide whether the estimate fits your use case. See our methodology standards.