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Gross Profit Margin illustration

Small Business · Margin

Gross Profit Margin

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Use gross profit margin to see how much of each sales dollar remains after the direct cost of producing your product or service.

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Service business margin

(Revenue - Cost of Goods Sold) / Revenue

$40,000 cost on $100,000 revenue leaves a 60% gross margin.

Check your inputs before you rely on the result — calculations are informational only and depend entirely on the numbers you enter. See our Terms.

Variables and units

  • Revenue

    Total sales revenue for the period.

    currency

  • Cost of Goods Sold

    Direct cost of the goods or services sold.

    currency

Common mistakes

  • Including overhead or salaries in COGS.
  • Using profit instead of revenue in the denominator.

Step-by-step example

Service business margin

$40,000 cost on $100,000 revenue leaves a 60% gross margin.