Profitability of core operations. The Operating Margin Calculator takes revenue, cost of goods sold, operating expenses, target operating margin and returns operating margin plus operating profit, revenue needed for the target margin at current costs. Results update as you type, and the formula is shown under the result so you can repeat it in your own spreadsheet.
Margins tell you where the money goes between revenue and profit. Track each margin over time and against similar businesses; a falling margin while revenue grows is the signal to investigate. Use the worked example below to check the maths against your own figures.
How the Operating Margin Calculator works
The profitability of the core operation before interest and tax. The last figure shows what revenue would have to be, at today's costs, to reach your target margin.
Worked example
With the example values (revenue of $500,000, cost of goods sold of $300,000, operating expenses of $120,000, target operating margin of 20%), the operating margin is 16%; operating profit $80,000.00, revenue needed for the target margin at current costs $525,000.00. Change any figure above and the result updates immediately; use Copy results to paste the summary into a note or email.
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Frequently Asked Questions
How is operating margin calculated?
operating margin = (revenue − COGS − operating expenses) ÷ revenue.
Which figures do I need?
Revenue, cost of goods sold, operating expenses, target operating margin. Take them from the same period and the same set of accounts or reports so the ratio is consistent, and check the example values as a guide to the units expected.
What is a good margin?
It depends on the industry: grocery and distribution run on low single-digit net margins, software and services on 20% or more. Compare with similar businesses and watch your own trend.
