Our online business profit margin calculator is a must for any business. The profit margin calculator allows you to calculate the profit earned from selling something.
Profitability can be analyzed using our business profit margin calculator, as well as how well a firm turns revenue into profit. Calculating profit will be easier with the formulas and examples in our guide.
Try this FREE profit margin calculator today!
How to Use the Profit Margin Calculator
- Enter the amount you will charge the customer into the first field, labeled, “Cost of Goods/Service”.
- Enter the number you expect to sell in one month into the field, labeled “New Sale Price a Month”.
- Enter the profit margin percentage that you calculated into the field, labeled, “Profit Margin (%)”.
- Press the “Calculate” button.
- Below the calculate button, you will see the total amount that will be received from sales in a month, followed by the amount of profit divided that you can expect to make from those sales.
Cost of goods sold/service
The price paid to produce or obtain a product. Including labor, materials, and variable costs. Knowing this cost of goods sold allows you to plan your profit accordingly.
New Sales a Month Definition
When thinking of new sales per month, you must think of all possible sales that will be generated through the business profit calculator for this particular good or service of profit margin calculator.
Of course, this will be an estimate. Unless you are a brand new business, or this is a brand new product or service, you can probably use an estimate from a previous month.
A better estimate might be to average the last several months to get an average of how many of this good or service you can expect to sell each month.
If you are a new business, or you are selling a new product, you will need to just make the best estimate you can. Remember, that this type of estimate may not be accurate. And, you will need to keep this in consideration when you see the calculation that is generated.
Margin – This is a price increase applied to the cost of a product to make a profit. It is important to know this margin during the pricing phase of a product so it can be adapted when necessary.
Profit – is your revenue minus costs. It’s foremost important to know the actual quantity of money you’ve received to assess a product’s success. To ensure the growth of business profit should be increased.
Revenue -The revenue figure is the total amount received for a product by a client after profit is added to the cost of the product. It is important to know the exact amount of money you have received, To gauge the success of a product.
What is Profit Margin
The profit margin measures the degree to which a company or business is profitable or not. In addition to being used as a measure of a company’s financial health, management abilities, and growth potential, profit margins are also used as indicators of creditors, investors, as well as business owners themselves.
Reasons To Use The Profit Margin Calculator
This online business profit calculator can be used to determine if you are charging enough for your products. Perhaps you are selling more than you can produce, but your company is still going in the red.
This Business profit calculator online will help you determine if you might need to raise the price of your goods or services so that you can make enough profit to meet your needs divided by revenue.
Making a profit enables a business to:
- Grow and expand
- More investment
- Recruit more employees.
How to Calculate Profit Margin
You can calculate the profit margin ratio by subtracting total expenses from total revenue, and then dividing this number by total expenses.
As an example, Mr. William earns a revenue of $23,000 from selling rackets.
Mr. William has total expenses of $10,000.
Profit Margin Formula :
Profit Margin = ( total revenue – total expenses) / total revenue
Total Revenue = $23,000
Total Expenses = $10,000
Profit Margin = ( $23,000 – $10,000) / $23,000
Profit Margin = $13,000 / $23,000
Profit Margin = $0.5652
Types of Profit Margins
Typically there are three types of profit margins:
1: Gross Profit Margin
To measure the profitability of a company’s products, the gross profit margin calculator is usually used. The figure shows the percentage of revenues above the product’s manufacturing costs (COGS – the cost of goods sold). COGS includes materials and Laboure are involved directly in production.
Gross Profit Margin Calculation
Ford company earns $80,000 in sales revenue the previous year and their Cost of goods sold (COGS) is $50,000.
Gross Profit Margin Formula :
Gross Profit margin = ( (revenue – COGS) ÷ revenue ) * 100
Gross profit margin = (80000 – 50000) ÷ 80000) * 100 =
Gross Profit margin = 0.375 * 100 = 37.5 %
Gross Profit margin = 0.375 * 100 = 37.5 %
2: Net Profit Margin
The net profit margin is perhaps the most important measure of a company’s overall profitability. It is the ratio of net profits to revenues for a company or business segment. After accounting for all of the expenses inclusive of earning in those revenues, this will provide you with the detail on the percentage of how much profit you earn from every $1 in sales. Larger profit margins mean that more of every dollar in sales is kept as profit.
How to calculate profit percentage
Mr. John’s company got $800,000 in sales revenue the previous year with $90,000 in investment. Mr. John’s total expenses are abreast of $300,000.
Net Profit Margin Formula :
Net profit margin = (total revenue – total expenses) ÷ total sales
Total revenue = $800,000 + $90,000 = $890,000
Total expenses = $300,000
Total sales = $800,000
Net profit margin = (( $890,000 – $300,000 ) / $800,000 ) * 100
Net profit margin = 0.7375 * 100
Net profit margin = 73.75 %
3: Operating Profit Margin
Operational margin is an important measure of the overall profitability of a company’s activities. It is the ratio of operating profits to corporate or industry revenues.
Expressed as a percentage, the operating margin indicates the number of operating profits generated for each dollar of revenue after taking into account the direct costs involved in earning those revenues. A larger margin means that a greater share of each dollar of sales is retained as profit.
Operating Profit Margin Calculation
Mr. John’s had merely $600,000 in sales revenue in his firm last year. The operating expenses of Mr. John’s firm are almost $200,000.
Operating Profit Margin Formula :
Operating profit margin = operating income ÷ revenue
Total revenue = $600,000
Total operating expenses = $200,000
Operating profit margin = (( $600,000 – $200,000 ) / $600,000) * 100
Operating profit margin = 0.66667 * 100
Operating profit margin = 66.67 %
