Formula
Profit = revenue - total cost. Profit margin tells you how much of each sales dollar remains after costs.
Formula: Profit margin = (revenue - total cost) ÷ revenue
Business / United States
Profit margin calculator
Enter revenue and total cost to see profit, profit margin, and cost ratio for a simple business snapshot.
Calculate profit margin
Profit margin = profit ÷ revenue
Total sales for the same period
Materials, labor, overhead, and other direct costs you want included
Assumptions
- Uses USD for the example
- Revenue and total cost cover the same period
- Taxes, refunds, and special fees are excluded unless you add them into total cost
Quick visual
Quick example
A bakery that earns $50,000 in monthly revenue and has $30,000 in total cost makes $20,000 profit.
Profit margin = 20,000 ÷ 50,000 = 0.4 = 40%
Cost ratio = 30,000 ÷ 50,000 = 60%
Common mistakes
- Comparing revenue from one month with cost from another month
- Leaving out major expenses like rent, labor, or equipment depreciation
- Mixing up profit margin with markup
Need help?
Read the full instructions and assumptions for this calculator.