Gross profit is revenue minus the cost of goods sold: the amount left after paying only for what you sold, before rent, salaries, marketing and tax. It is the first line of defence for any business, because if gross profit is too small nothing further down the income statement can fix it. Enter your revenue and direct costs to get the gross profit, the gross margin and the markup you are effectively charging on cost.
Gross Profit Calculator
Gross profit is what remains of your sales after paying only for the things you sold: materials, manufacturing, purchase cost of stock, and the labour that goes directly into the product or service. It does not yet cover rent, salaries, marketing or tax, which is why it is the first number to check when a business is busy but not making money. The gross profit calculator takes revenue and cost of goods sold and returns the gross profit, the gross margin and the equivalent markup.
Revenue of $250,000 with $150,000 of direct costs leaves a gross profit of $100,000, a 40% gross margin and a 66.7% markup on cost. Track the margin over time rather than the absolute figure: a falling gross margin means suppliers, discounts or product mix are eating into profit before overheads are even counted. Compare it with the net profit calculator, which continues the calculation down to the bottom line.
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Frequently Asked Questions
What counts as cost of goods sold?
Costs that vary directly with what you sell: materials, manufacturing, the purchase price of stock, packaging, and labour that goes directly into producing the product or delivering the service. Rent, admin salaries and marketing are operating expenses, not COGS.
What is a good gross margin?
It depends on the industry. Supermarkets and distributors run on 10–25%, restaurants 60–70% on food, consultancies and software businesses 70–90%. Compare with similar companies and watch your own trend.
Why is my gross profit positive but the business loses money?
Gross profit has to cover all operating expenses, interest and tax. If those exceed it you make a net loss even though each sale is profitable; the net profit calculator shows the full picture.
