What is the difference between gross margin and markup?

Gross margin measures profit as a % of selling price. Markup measures profit as a % of cost. A product that costs $60 and sells for $100 has a 40% gross margin and 66.7% markup. Retailers often set prices by markup but should track margin.

Direct materials and components. Direct labor (production workers). Manufacturing overhead (factory rent, utilities). For retailers: wholesale cost of inventory. For services: direct labor costs of delivering the service. Excludes sales, admin, and marketing expenses.

Why is my gross margin declining?

Common causes: input cost inflation (raw materials, freight). Pricing pressure from competition. Product mix shift toward lower-margin items. Volume discounts to win large customers. Manufacturing inefficiency. Address the root cause — COGS or pricing — not just track it.

How do I calculate net profit margin?

Net profit margin = net income ÷ revenue × 100. Start with gross profit, then subtract operating expenses (SG&A, R&D), depreciation, interest, and taxes to get net income. Net margin varies widely: 5% is typical for retail, 20%+ for software.

Gross Margin Calculator — Profit Margin & Markup | KalkWise

By the KalkWise Editorial Team Reviewed for accuracy Updated June 2026

What is the gross margin calculator — profit margin & markup?

In short

Gross margin = (revenue − COGS) ÷ revenue × 100. A business with $500K revenue and $300K COGS has a $200K gross profit and 40% gross margin. SaaS companies average 70%+; retail averages 25–35%.

Calculates gross profit, gross margin percentage, markup percentage, and COGS ratio from revenue and cost of goods sold.

How to use this calculator

1Enter total revenue (net sales).
2Enter total cost of goods sold (COGS) — direct costs of producing/purchasing what you sell.

The formula

Gross Profit=Revenue−COGS

Gross Margin %=Gross ProfitRevenue×100

Gross Profit = R − C; Gross Margin % = (R − C) ÷ R × 100; Markup % = (R − C) ÷ C × 100

R: — Revenue
C: — COGS

Worked example

The scenario

$500,000 revenue, $300,000 COGS.

gives

The result

Gross profit: $200,000. Gross margin: 40%. Markup: 66.7%. COGS ratio: 60%.

Common use cases

Track gross margin trends over time.
Compare gross margin to industry benchmarks.
Evaluate pricing and cost control decisions.
Model impact of price increase or COGS reduction on profit.

Limitations & assumptions

Gross margin only covers direct costs — operating expenses (salaries, rent, marketing) reduce this to operating margin.
COGS definition varies by business — ensure consistency for meaningful comparisons.
High gross margin doesn't guarantee profitability if operating expenses are high.
Industries have very different gross margin norms — compare within industry.

Frequently asked questions

Software/SaaS: 65–80%. Financial services: 60–75%. Healthcare services: 40–60%. Retail: 25–35%. Grocery: 25–30%. Restaurants: 60–70% food margin, 30–40% beverage. Manufacturing: 25–40%. Always compare within your industry.

Disclaimer: KalkWise calculators are provided for general informational and educational purposes only and do not constitute financial, investment, tax, or legal advice. Results are estimates based on the figures you enter and the assumptions described above. Actual outcomes will vary. Consult a qualified professional before making financial decisions.

Revenue & Costs