Profit margin calculator

Three margins, one calculation. Gross margin tests your buying price, contribution margin tests each extra order, and net margin is what the business keeps.

Gross margin
56.0%
Contribution margin
42.0%
Net margin
20.0%

Net profit in money: €10,000.

The formula

  • Gross margin % = (net revenue − COGS) / net revenue × 100.
  • Contribution margin % = (net revenue − COGS − variable order costs) / net revenue × 100.
  • Net margin % = (net revenue − COGS − variable order costs − ads and overhead) / net revenue × 100.

Worked example

€50,000 net revenue with €22,000 COGS gives a 56% gross margin.

After €7,000 of variable order costs (shipping, fees, packaging, expected returns), contribution margin is 42%.

After €11,000 of advertising and overhead, net margin is 20% — €10,000 in profit.

How to use the result

  • ◆Use net revenue (after refunds and discounts), otherwise every margin is overstated.
  • ◆Include expected return cost in variable order costs; it behaves like a per-order cost, not overhead.
  • ◆Compare contribution margin between products before deciding where to advertise.

Frequently asked questions

Which margin should I use for pricing decisions?+

Contribution margin. It shows whether one more sale of that item leaves money behind after every variable cost.

Is markup the same as margin?+

No. Markup is measured on cost, margin on price. A 50% markup on a €20 item gives €30 and a 33% margin.

A calculator gives you one number. The scan gives you the whole picture.

Run the free Profit Leak Scan for your estimated Profit Leak Report: your Profit Leak Score, the estimated share of revenue at risk and your top five leaks with recommended actions. Connect your store later to replace estimates with your actual numbers.

Free · No card · Nothing to install · Estimates, not your accounting data

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