Enter the total revenue and total cost into the calculator to determine profit (TR − TC). This calculator can also solve for any one variable when the other two are known.
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Profit Formulas
Profit = TR - TC
Gross\ Profit = Revenue - COGS
Net\ Profit = Revenue - COGS - OpEx - Interest - Taxes
TR = Total Revenue | TC = Total Cost | COGS = Cost of Goods Sold | OpEx = Operating Expenses
Profit Types Compared
| Profit Type | Formula | Excludes | Measures |
|---|---|---|---|
| Gross Profit | Revenue − COGS | OpEx, interest, taxes | Production efficiency |
| Operating Profit (EBIT) | Gross Profit − OpEx | Interest, taxes | Core business performance |
| Net Profit | EBIT − Interest − Taxes | Nothing | Bottom-line profitability |
| Contribution Margin | (Price − Variable Cost) × Units | Fixed costs | Per-unit profitability |
Average Net Profit Margins by Industry (2024)
| Industry | Avg. Net Margin | Key Driver |
|---|---|---|
| Software / SaaS | 20–35% | Low marginal cost per user |
| Pharmaceuticals | 15–25% | Patent-protected pricing power |
| Financial Services | 18–28% | Interest spread and fees |
| Consulting | 12–22% | Low capital, high billing rates |
| Manufacturing | 5–10% | Material and labor cost drag |
| Healthcare | 3–8% | Reimbursement compression |
| Restaurants | 3–9% | High labor and food costs |
| Retail | 2–5% | High volume, thin margins |
| E-commerce | 1–5% | Logistics and returns costs |
| Grocery | 1–3% | Perishables, price competition |
Profit vs. Maximum Profit
The calculator above measures current profit at a given revenue and cost snapshot. Maximum profit is an optimization target: the output level or price point that produces the highest possible profit, not just a measurement at a fixed point.
In economics, profit is maximized where Marginal Revenue (MR) = Marginal Cost (MC). Below this output, each additional unit adds more to revenue than to cost. Above it, each additional unit costs more than it earns. This MR = MC rule holds across all market structures. In perfect competition, price equals MR, so the condition becomes Price = MC. In monopoly or imperfect competition, price exceeds MR, so the profit-maximizing quantity is lower than the competitive level.
For businesses without full cost curve data, the contribution margin approach is more practical: find the price or product mix where (Price − Variable Cost) per unit is highest relative to fixed cost coverage. The Breakeven/Target tab in the calculator above applies this directly.
Margin vs. Markup
Margin and markup both measure profit but from different bases. Margin divides profit by revenue (selling price). Markup divides profit by cost. For any given transaction, margin is always lower than markup. A common pricing error: setting a 50% markup while targeting a 50% margin produces a 33.3% margin instead, understating the required selling price.
| Markup | Equivalent Margin |
|---|---|
| 10% | 9.1% |
| 25% | 20.0% |
| 50% | 33.3% |
| 100% | 50.0% |
| 200% | 66.7% |
Example
A retailer buys products at $60 and sells them at $100, with monthly fixed costs of $8,000.
- Gross Profit per unit: $100 − $60 = $40
- Gross Margin: $40 / $100 = 40%
- Markup: $40 / $60 = 66.7%
- Breakeven quantity: $8,000 / $40 = 200 units/month
- Profit at 300 units: (300 × $40) − $8,000 = $4,000
