Profit Margin Calculator
Quickly compute gross, net, and contribution margins with a cost breakdown.
Profit Margin
Enter your revenues and costs — results update instantly.
E-commerce Margin Benchmarks
Use these benchmarks to compare your margins and allocation to industry expectations.
| Metric | Poor | Average | Good | Excellent |
|---|---|---|---|---|
| Gross Margin | <30% | 30-40% | 40-60% | >60% |
| Net Margin | <5% | 5-10% | 10-20% | >20% |
| Ad Spend % of Revenue | >30% | 20-30% | 15-20% | <15% |
What is Profit Margin?
Profit margins show how much of every sales dollar your business keeps after covering costs. Gross margin focuses on product-level profitability (after COGS), while net margin accounts for operating expenses and ad spend.
How to Calculate
Step 1: Calculate gross profit = Revenue − COGS. Step 2: Gross margin = Gross profit ÷ Revenue. Step 3: Subtract operating and ad costs to get net profit, then divide by Revenue for net margin. Contribution margin excludes operating costs and focuses on contribution after COGS and ads.
Formulas
Gross Profit = Revenue − COGS
Gross Margin = Gross Profit ÷ Revenue
Net Profit = Revenue − COGS − Operating − Ad Spend
Net Margin = Net Profit ÷ Revenue
Contribution Margin = (Revenue − COGS − Ad Spend) ÷ Revenue
Real-World Example
Using the example defaults: Revenue , COGS , Operating , Ad Spend . Gross profit is (), net profit is (), and contribution margin is .
Why This Matters
Understanding margins helps you set prices, decide how much to invest in ads, and prioritize cost reductions. Strong gross margins give room to scale acquisition; healthy net margins indicate efficient operations and sustainable growth potential.