Gross Margin Calculator 2026
Instantly calculate gross profit, gross margin percentage, and markup from your revenue and cost of goods sold. Essential for business analysis, retail pricing, and financial planning.
Revenue & Costs
Enter your revenue and cost of goods sold to calculate margins
Total sales revenue before any deductions.
Direct costs of producing goods/services sold (materials, direct labour, manufacturing overhead).
How many decimal places to show in results.
Margin Analysis
Gross profit, margin percentage, markup, and detailed breakdown
Enter your revenue and COGS above, then click Calculate Gross Margin to see your profit analysis.
Typical Gross Margin by Industry
Compare your gross margin to industry averages. These benchmarks help you assess whether your pricing and cost structure are competitive.
| Industry | Typical Gross Margin | Notes |
|---|---|---|
| Retail (General) | 20-40% | Varies by product type and volume |
| Retail (Luxury) | 50-70% | Higher margins on premium goods |
| Restaurants | 60-70% | High food costs but strong margins |
| Grocery Stores | 20-30% | Low margins, high volume model |
| Manufacturing | 25-45% | Depends on production efficiency |
| Software/SaaS | 70-90% | Very high margins, low COGS |
| Consulting/Services | 50-80% | Labour is primary cost |
| Construction | 20-35% | Material and labour intensive |
| Automotive | 10-20% | Low margins, high capital costs |
| Pharmaceuticals | 60-80% | High R&D costs but strong margins |
Gross Margin Calculator FAQ
Everything you need to know about gross margin, markup, profit calculations, and how to use this tool for business analysis.
Gross margin is calculated by subtracting the Cost of Goods Sold (COGS) from Revenue to get Gross Profit, then dividing Gross Profit by Revenue and multiplying by 100 to get a percentage. Formula: Gross Margin % = ((Revenue – COGS) / Revenue) × 100. For example, if Revenue is £10,000 and COGS is £6,000, Gross Profit is £4,000, and Gross Margin is (£4,000 / £10,000) × 100 = 40%.
Gross margin and markup are related but different. Gross margin is the percentage of profit relative to the selling price (Revenue). Markup is the percentage of profit relative to the cost (COGS). Example: If you buy something for £60 and sell it for £100, your gross margin is 40% (£40 profit / £100 price), but your markup is 66.7% (£40 profit / £60 cost). Gross margin is always lower than markup for the same transaction.
A ‘good’ gross margin varies significantly by industry. Retail typically has 20-40% margins. Restaurants often operate at 60-70% gross margins but have high overhead. Software and SaaS companies can achieve 70-90% gross margins. Manufacturing typically ranges from 25-45%. Service businesses often have 50-80% gross margins. The key is comparing your margin to industry benchmarks and ensuring it covers your operating expenses.
COGS includes all direct costs attributable to producing goods or services sold. This includes: raw materials, direct labour costs for production, manufacturing overhead, packaging costs, and freight-in (shipping costs to get inventory). COGS does NOT include operating expenses like rent, marketing, administrative salaries, or utilities—those are subtracted later to calculate operating profit.
To calculate selling price from a desired gross margin percentage, use the formula: Selling Price = Cost / (1 – Margin %). For example, if your cost is £50 and you want a 40% margin: Selling Price = £50 / (1 – 0.40) = £50 / 0.60 = £83.33. This ensures that after subtracting your cost, you achieve exactly your target margin percentage.
Gross profit is Revenue minus Cost of Goods Sold (COGS)—it shows profit from core business operations before overhead. Net profit is what remains after ALL expenses are deducted: COGS, operating expenses (rent, salaries, marketing), interest, and taxes. Gross profit margin is always higher than net profit margin. A business can have strong gross margins but poor net profit if operating expenses are too high.