Calculate gross margin, required selling price, or unit sales profit from revenue, COGS, cost, margin, and unit price inputs for pricing.
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Gross Margin Formula
The calculator uses a different formula for each mode.
Margin mode (from totals):
Gross Margin % = (Revenue - COGS) / Revenue * 100
Target price mode (price needed to hit a margin):
Price = Cost / (1 - Target Margin %)
Unit sales mode:
Gross Margin % = ((Price - Unit Cost) * Units) / (Price * Units) * 100
- Revenue: total sales before any deductions
- COGS: cost of goods sold, the direct costs tied to producing or buying what you sold
- Cost: the direct cost for one unit or job
- Target Margin %: the gross margin you want to earn, entered as a percent
- Price: selling price per unit
- Units: number of units sold
Gross margin only counts direct costs. Rent, salaries outside production, marketing, and interest belong in operating or net margin, not here. The target margin must be less than 100% because no cost can divide into a price that produces a 100% gross margin.
Reference Tables
Use the first table to gauge whether a margin result is typical for the type of business. Use the second table to convert between margin and markup, since the two are often confused.
| Industry | Typical Gross Margin |
|---|---|
| Grocery and supermarkets | 20% - 30% |
| Restaurants | 60% - 70% |
| General retail | 25% - 50% |
| Apparel and specialty retail | 45% - 55% |
| Manufacturing | 25% - 35% |
| Construction and trades | 15% - 25% |
| Software (SaaS) | 70% - 85% |
| Professional services | 40% - 60% |
| Markup on Cost | Equivalent Gross Margin |
|---|---|
| 25% | 20.00% |
| 50% | 33.33% |
| 75% | 42.86% |
| 100% | 50.00% |
| 150% | 60.00% |
| 200% | 66.67% |
| 300% | 75.00% |
Example and FAQ
Example. A shop sells $80,000 of product in a month and the items cost $52,000 to acquire. Gross profit is $28,000. Gross margin is 28,000 / 80,000 = 35%. To hit a 50% margin instead, the same $52,000 in cost would need to sell for 52,000 / (1 - 0.50) = $104,000.
Is gross margin the same as markup? No. Margin is profit divided by price. Markup is profit divided by cost. A 50% markup is only a 33.33% margin.
What is a good gross margin? It depends on the industry. Software firms often clear 75% while grocers run under 30% and stay healthy. Compare against the table above, not against an absolute number.
Why is my margin lower than my markup? Margin uses the larger number (price) in the denominator, so the percentage is always smaller than the markup on cost.
Should I include shipping or labor in COGS? Include direct costs needed to make or deliver the product, such as inbound freight, raw materials, and production labor. Leave out office rent, marketing, and admin salaries.
