Gross Margin Calculator
What each revenue dollar keeps once the cost of delivering it is paid.
Gross margin is the share of revenue left after the direct cost of delivering what you sold: (revenue − COGS) ÷ revenue. It is the first number an investor, a lender or an acquirer looks for, because it sets the ceiling on everything else — you cannot pay for marketing, salaries or profit out of money that left the building as cost of goods. This gross margin calculator turns two figures into gross profit in dollars, the margin as a percentage, and the plain-English version of it: how many cents of every revenue dollar you actually keep.
What belongs in COGS — and what the number is telling you
- COGS is only what scales with a sale: materials, manufacturing, payment processing, shipping, per-customer hosting, and contractor time billed to a specific job.
- Office rent, salaried staff, and software you would still pay for with zero sales are operating expenses, not COGS. Sliding them into COGS understates margin and wrecks every comparison you make later.
- Compare your margin only against businesses with your cost structure — software sits far above retail, and services land somewhere between. Your own trend over the last six months is the more useful benchmark anyway.
- Percentage and dollars answer different questions. The percentage tells you whether the model works; gross profit in dollars tells you how much is actually available to run the company this month.
- Track it per product and per customer segment, not just company-wide. A blended 60% routinely hides one line at 80% quietly subsidising another that is already underwater.
- Falling gross margin while revenue rises is the classic warning sign — usually discounting, a shift in product mix, or input costs that crept up while the price list stayed frozen.
Example output
Revenue + COGS: Revenue $240,000 · cost of goods sold $96,000
Gross profit: $144,000 Gross margin: 60.0% Every $1 of revenue keeps 60.0¢ after direct costs — that's what's left to pay for sales, marketing, salaries and profit. COGS: 40.0% of revenue. Priced as a markup on cost, that's 150.0% over COGS — the same money, divided by cost instead of price.
Frequently asked questions
- What is a good gross margin?
- It depends entirely on the model: software and information products sit high because an extra copy costs almost nothing to deliver, while retail and hardware sit far lower because every unit carries real material cost. The more useful test is direction — a margin sliding quarter after quarter is a problem at any absolute level.
- What's the difference between gross margin and net margin?
- Gross margin subtracts only the direct cost of delivery. Net margin subtracts everything else as well: salaries, rent, marketing, interest and tax. Gross margin tells you whether the product makes money; net margin tells you whether the company does. A strong gross margin with a negative net margin means overhead outgrew sales.
- Is gross margin the same as markup?
- No. Both use the same profit figure but divide it by different things — margin divides by revenue, markup divides by cost. A 60% gross margin is the same money as a 150% markup on cost. Treating one as the other is the fastest route to pricing below what your business actually needs.
- Why is this free — what's the catch?
- No catch and no signup. This tool is funded by EaseClaw, an AI agent that finds people publicly asking for what you sell and drafts your replies. If the free tool is useful, some people try the free trial. That's the whole business model.