How to calculate profit margin
Profit margin is simply profit expressed as a percentage of your selling price. Subtract your cost from your price to get gross profit, then divide by the price. A $50 product that costs you $20 has a $30 gross profit and a 60% gross margin.
Gross margin = (price − cost) ÷ price
Gross margin vs net margin
Gross margin only subtracts the product cost. Net margin is the real story: it also subtracts shipping, payment processing fees, advertising or CAC, packaging, and a share of your fixed overhead. That same 60% gross-margin product can land at a 30% net margin once an $8 CAC and 2.9% + 30¢ in fees come out — still healthy, but a very different number. Most basic calculators stop at gross; this one shows both.
Margin vs markup — don't confuse them
Margin is profit over price; markup is profit over cost. A 50% margin is a 100% markup, and treating them as the same number is how merchants accidentally underprice. This calculator reports both side by side so you always know exactly what you keep.
What's a good profit margin for ecommerce?
As a rule of thumb, gross margins of 30–60% are common in ecommerce. For net margin: under about 5% is thin or startup-stage, 5–15% is established and healthy, and 15%+ is strong. The benchmark band above the results shows where your number lands.
Why revenue isn't profit
It's easy to chase top-line revenue, but a high-revenue store with razor-thin margins can keep less than a smaller, leaner one. A shop doing $100k/month at 3% net keeps $3,000; a shop doing $40k/month at 20% net keeps $8,000. Revenue is the vanity metric. Margin is what you actually keep.
Frequently asked questions
- How do you calculate profit margin?
- Profit margin is profit divided by selling price. Subtract cost from price to get gross profit, then divide by price: a $50 item that costs $20 has a $30 gross profit and a 60% gross margin (30 ÷ 50). Net margin goes further and subtracts shipping, payment fees, ad spend, and overhead before dividing by price.
- What's the difference between gross margin and net margin?
- Gross margin only accounts for the product cost (COGS). Net margin subtracts every other cost of fulfilling the order — shipping, payment processing fees, advertising/CAC, packaging, and a share of fixed overhead. Net margin is the number that tells you whether you actually keep money on a sale.
- What is the difference between margin and markup?
- Margin is profit as a percentage of the selling price; markup is profit as a percentage of cost. A 50% margin equals a 100% markup. Confusing the two is one of the most common pricing mistakes — this calculator always shows both so there's no ambiguity.
- What is a good profit margin for ecommerce?
- Gross margins of 30–60% are typical for ecommerce. For net margin, under ~5% is thin or startup-stage, 5–15% is established and healthy, and 15%+ is strong. Margins vary by category, so treat these as guideposts rather than hard rules.
- Why isn't revenue the same as profit?
- Revenue is the total money coming in; profit is what's left after costs. A store doing $100k/month at a 3% net margin keeps $3k, while a store doing $40k/month at 20% keeps $8k. Revenue is the vanity metric — margin is what you actually keep.
- Is this profit margin calculator free?
- Yes — free forever, no signup, no email. Every calculation runs entirely in your browser, so your numbers never leave your device.
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