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.