Profit Margin Calculator
Calculate gross margin, net margin, and markup for any product. See exactly where your revenue goes — and how much you actually keep.
✓ Gross & net margin ✓ Cost breakdown visual ✓ Reverse price calculator
Ready to start?
Profit Margin vs Markup — What's the Difference?
These two numbers are closely related but measure different things, and confusing them is one of the most common pricing mistakes in ecommerce.
Profit margin is profit expressed as a percentage of revenue. If you sell a product for $100 and your cost is $40, your gross margin is 60% — you keep 60 cents of every dollar of revenue.
Markup is profit expressed as a percentage of cost. Using the same example, a $60 gross profit on a $40 cost is a 150% markup.
The confusion causes real pricing errors. A product with a "50% markup" has a 33% margin — not 50%. If you're targeting a specific margin, use the reverse calculator above to work backwards from margin to price.
Gross Margin vs Net Margin
Gross margin only subtracts the direct cost of producing and delivering the product (COGS). It tells you how much room you have to cover everything else.
Net margin subtracts everything — COGS, advertising, fulfilment, overhead, salaries, and taxes. It's what you actually take home.
For DTC ecommerce brands, a useful rule of thumb: gross margin needs to be at least 2–3× your customer acquisition cost (CAC) to run a sustainable paid advertising channel.
What's a Good Profit Margin for Ecommerce?
It depends heavily on your category. Digital and software products can run 70–95% gross margins. Beauty and supplements typically see 60–80%. Apparel and fashion run 40–60%. Low-margin categories like electronics or commodities often sit below 30%.
For net margin, most healthy DTC brands aim for 10–20% after all expenses. Below 10% leaves little room to reinvest in growth. Above 20% is strong and usually indicates pricing power or operational efficiency.
Not convinced yet?
What should I include in COGS?
Everything that varies directly with each unit sold: manufacturing cost, raw materials, packaging, inbound shipping from supplier, outbound shipping to customer, payment processing fees (2–3%), and a provision for returns and refunds (typically 2–5% of revenue). Don't include salaries, office costs, or software subscriptions, those are operating expenses, not COGS.
How does ad spend factor into profit margin?
Ad spend is a variable cost that scales with revenue, which makes it behave more like COGS than fixed overhead. Many ecommerce operators include their blended CAC or per-unit ad spend in their "fully-loaded" margin calculation to get a more accurate picture of unit economics. This is what the "net margin" calculation in this tool does when you fill in the ad spend field.
Why is my gross margin high but net margin low?
This usually means your operating expenses are eating into your gross profit. Common culprits: high advertising costs (CAC too high relative to gross profit), heavy overhead, high return rates, expensive fulfilment, or underpriced shipping. Use the cost breakdown chart above to see exactly which cost is the biggest drain.
How do I calculate the selling price for a target margin?
Use the "Target Margin → Price" tab above. Enter your COGS and the gross margin percentage you want to achieve, and it'll calculate the minimum price you need to charge. The formula is: Price = COGS ÷ (1 − Target Margin %).
Is a 50% profit margin good for ecommerce?
A 50% gross margin is solid for most physical product ecommerce categories. It means you keep $0.50 of every dollar of revenue before advertising and overhead. Whether that's "good" depends on your ad efficiency, a 50% gross margin with a $30 CAC on a $60 product leaves zero room for overhead. Context matters.
