Total sales for the period.
Direct costs of producing what you sold.
Rent, admin, marketing — everything else.
A solid net margin gives you resilience and cash to reinvest. Keep watching gross margin — that's where erosion usually starts.
Where each period's revenue goes
Cost of sales, overheads and what's left as profit.
Gross margin, net margin and markup
These three numbers get mixed up constantly. Here's the difference:
Gross margin % = (Revenue − Cost of sales) ÷ Revenue × 100
Net margin % = (Revenue − Cost of sales − Overheads) ÷ Revenue × 100
Markup % = (Revenue − Cost of sales) ÷ Cost of sales × 100
Margin is profit as a share of the selling price. Markup is the same profit as a share of the cost. A 50% markup is only a 33% margin — mixing them up is one of the most common pricing mistakes.
Why it matters
Gross margin tells you whether the core product makes money. Net margin tells you whether the whole business does. Watch both: healthy gross margin with poor net margin means your overheads are the problem, not your pricing.
Frequently asked questions
What's the difference between margin and markup?
Margin is profit divided by the selling price; markup is the same profit divided by the cost. Because the denominators differ, the percentages differ — a 50% markup equals a 33.3% margin.
What counts as cost of sales vs overheads?
Cost of sales (COGS) are the direct costs of producing what you sell — materials, production labour, packaging. Overheads are the running costs of the business that aren't tied to a specific sale — rent, admin salaries, software, marketing.
What's a good net profit margin?
It varies hugely by industry. As a general guide, under 5% is thin, 5–10% is reasonable, and above 10% is strong — but compare against typical margins for your sector rather than a universal number.
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These calculators are for general guidance only and use the figures you enter. They are not financial, accounting or tax advice. Always check important decisions with a qualified professional.