Enter revenue and cost of goods sold to get gross profit, your gross margin percentage, and the equivalent markup.
Gross profit covers only direct costs (COGS). Operating expenses, taxes, and overhead come out after. Estimate only.
Gross profit is revenue minus the cost of goods sold. Expressed as a percentage of revenue it's your margin; as a percentage of cost it's your markup — two different numbers people constantly confuse.
Gross profit = revenue − COGS · Margin = profit ÷ revenue · Markup = profit ÷ cost
Three figures from two inputs. Gross profit = revenue − cost of goods sold. Gross margin = gross profit ÷ revenue. Markup = gross profit ÷ cost. Margin and markup describe the same money against different denominators, which is precisely why confusing them is such an expensive habit.
The calculator opens with revenue of $10,000 and COGS of $6,000. Gross profit is $10,000 − $6,000 = $4,000. Margin is $4,000 ÷ $10,000 = 40%. Markup is $4,000 ÷ $6,000 = 66.7%.
Same $4,000, two very different percentages. If you price by adding a "40% markup" to a $6,000 cost you will charge $8,400 and earn a 28.6% margin — you will have quietly given away more than a quarter of the profit you thought you had priced in. To hit a target margin, divide by what is left: to earn 40% on $6,000 of cost you need $6,000 ÷ (1 − 0.40) = $10,000.
Everything that is not a direct cost. Rent, your own wages, insurance, software subscriptions, vehicles, marketing and tax all come out of that $4,000, and a business with a healthy gross margin can still lose money every month once they do. Gross profit answers "is the work itself profitable"; it does not answer "is the business profitable."
The other honest difficulty is what belongs in COGS at all. Materials clearly do. The wages of the person doing the billable work usually do. Your accountant's fee does not. Where it gets genuinely arguable — a van used for both jobs and errands, a tool used across every job — the important thing is less which choice you make than that you make it consistently, because an inconsistent COGS definition makes month-to-month margin comparisons meaningless.
Start from the defaults and let COGS rise 10%, from $6,000 to $6,600. Gross profit falls to $3,400 and margin falls from 40% to 34% — a six-point drop from a ten-percent cost increase. To restore the original 40% margin you would need to charge $6,600 ÷ 0.60 = $11,000, a $1,000 price rise. A 10% cost increase requires a 10% price increase to stay level, and absorbing it "just this once" is how margins erode without anyone deciding to let them.
Typical gross margin varies so much by business model that cross-industry comparison is close to useless — service businesses selling mostly labour, retailers reselling goods, and software businesses live in completely different ranges. Compare yourself to your own last six months instead, and to quotes you have lost or won. The one number worth holding onto is your break-even: gross profit has to cover fixed costs before anything is yours, so knowing what monthly gross profit you need is more actionable than knowing what margin percentage an industry report suggests.
Quoting from markup while budgeting from margin is the classic, and it shows up as jobs that "should have" been profitable. Leaving your own labour out of COGS on jobs you work yourself is the second — it makes the work look far better than it is and leads to hiring someone at a price the job cannot support. Third is averaging margin across everything you sell, which hides the specific products or jobs that are losing money inside a comfortable-looking blended figure.
A calculator prices one job. Knowing whether the business works needs margin tracked per job or product over months, so the loss-makers separate from the winners instead of averaging together. That is what our Small Business Bookkeeping Spreadsheet is for — revenue, COGS and margin recorded month by month, so gross profit becomes something you can watch trend rather than something you calculate once and hope about.
No. A 50% markup on a $10 cost gives a $15 price — but that's only a 33% margin. Margin is always a share of the selling price; markup is a share of the cost.
It varies widely by industry — services run high, retail and food much lower. Compare against your own trend and sector norms.
Related: profit margin calculator · markup calculator · break-even units calculator · all free calculators.
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It uses standard formulas and recalculates the moment you change a value, so the math is exact for the inputs you enter. Treat the result as a reliable planning estimate; for decisions with legal or tax consequences, confirm the figures with a qualified professional.
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Last reviewed: September 2026. Free to use, no signup — Gross Profit Calculator by ToolWise Digital.
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