Profit margin calculator

Work out gross and net profit margin, and markup, from revenue and costs.

In shortGross margin = (revenue − direct costs) ÷ revenue × 100. Net margin = (revenue − all costs) ÷ revenue × 100. Markup = (price − cost) ÷ cost × 100.

Who uses itOwners, bookkeepers and job estimators
WhenAfter each month close or completed job
You needRevenue, direct costs and operating expenses
ResultGross margin, net margin and markup

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What the calculator does

Gross profit = revenue − direct costs. Gross margin = gross profit ÷ revenue × 100.

Net profit = gross profit − operating expenses. Net margin = net profit ÷ revenue × 100.

Markup = gross profit ÷ direct costs × 100.

This is a simple pre-tax view and not an accounting statement.

A worked example

A landscaping business has $50,000 revenue in a month, $30,000 in materials and crew wages, and $12,000 in other expenses. Gross margin is 40%, net profit is $8,000 or a 16% net margin, and the markup on direct costs is 66.7%.

Who uses this calculator

Use it to check whether a job, a product line or a month was profitable, or to understand how labor costs eat into margin in a service business.

Margin and markup are often confused. A 50% markup is only a 33% margin, which matters when you set prices.

A second example

An auto repair shop has $120,000 in revenue for the quarter, $84,000 in parts and technician wages, and $41,000 in rent, insurance, software and front desk pay. Gross profit is $36,000, a 30.0% gross margin, and the markup on direct costs is 42.9%. Operating expenses are larger than gross profit, so net profit is -$5,000, a net margin of -4.2%.

What your profit margin result means

Gross margin tells you whether the work itself pays, and net margin tells you whether the business pays after its fixed costs. A negative net margin next to a healthy gross margin usually points to too little volume or too much overhead rather than bad job pricing. The result is misleading when revenue and direct costs come from different periods, such as parts bought in March for jobs billed in April.

Common profit margin errors

Calculating margin on a job before the last invoices from suppliers arrive. Wait for final costs or mark the result as preliminary.
Leaving the owner’s labor out of direct costs on jobs the owner works on. Price that time at what you would pay someone else.
Comparing a month with large one-time purchases against a normal month. Spread big equipment costs or note them separately.

Adapt it to your team

Landscaping and tradesRun margin per crew or per job type, since mowing and installs often have very different margins.

Online sellersPut shipping, payment fees and returns into direct costs, because they grow with every order.

Worth knowingTrack margin by customer as well as by month. A few customers who demand extra visits often drag the whole average down.

What people ask about the profit margin calculator

What is the difference between margin and markup?

Margin is profit as a share of price. Markup is profit as a share of cost.

Is direct labor a direct cost?

For service businesses, crew wages on jobs are usually treated as direct costs.

Does this include taxes?

No. It is before income tax.

What is a good margin?

It depends on your industry. Compare with your own history.

Can profit margin be negative?

Yes. If operating expenses are larger than gross profit, net profit and net margin show as negative numbers. That means the period lost money even though each job still earned a gross profit.

Should margin be worked out before or after the owner’s pay?

If the owner is paid through payroll, that pay is already in direct labor or operating expenses. If the owner takes draws instead, net margin will look higher than at a business that pays a manager, so subtract a fair wage before comparing.

Related resources

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Skip the manual totals

Instead of adding up timesheets before you open the profit margin calculator, let EZTime total employee hours. Book a demo to see it with your team.

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General information and an estimate only. It is not legal, payroll, tax or financial advice. Rules vary by state and city. Check important results with a qualified professional.