Gross Margin Calculator
Split revenue across every layer of cost and see gross, operating and net margin separately — three very different measures of the same business.
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How it works
Gross margin covers only the direct cost of what you sold: materials, direct labour, freight, payment fees. It tells you whether the product itself works. Operating margin then deducts the cost of running the business — salaries, rent, software, marketing — and tells you whether the company works.
Businesses fail at both levels for different reasons and the fixes are opposite. A weak gross margin means the product or its pricing is wrong. A healthy gross margin with a negative operating margin means the product is fine and the overhead is too heavy for the volume.
Gross = revenue − COGS · Operating = gross − operating expenses · Net = operating − tax & interest
- COGS — costs that scale with each unit sold
- Operating expenses — the cost of running the business regardless of volume
- Contribution — revenue less variable cost — what each sale contributes to overheads
Worked example
5,000,000 of revenue with 2,100,000 of direct costs and 1,900,000 of overheads
Inputs
Results
A 58% gross margin is healthy; overheads consume nearly two thirds of it. Growth would improve the operating margin fast, because the overhead is largely fixed.
Frequently asked questions
What belongs in cost of goods sold?
Anything that rises when you sell one more unit: raw materials, direct labour, packaging, shipping, payment processing, and hosting costs that scale with usage. Fixed salaries and rent do not belong here.
What is a good gross margin?
It is entirely industry-dependent. Software often runs above 75%, manufacturing 25–40%, grocery retail under 25%. Compare against your own sector and your own trend, never against a general benchmark.
Why does gross margin matter more than revenue?
Because gross profit is the money that actually pays for everything else. Doubling revenue at a 5% gross margin barely moves the business; improving the margin to 15% at flat revenue triples what you have to work with.
Is my data sent anywhere?
No. The calculation runs entirely in your browser. Nothing you type is transmitted to us or stored.
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