The owner's workbench
Gross margin calculator
Gross margin shows how much of each sales dollar is left after the direct cost of delivering the work or product. Overhead comes after.
Your numbers
Your results
Revenue
$2,000,000.00
Markup
47.1%
Gross margin
32.0%
Gross profit
$640,000.00
Live conversion ledger
| Markup | Margin | Price | Profit |
|---|---|---|---|
| 25.0% | 20.0% | $1,700,000.00 | $340,000.00 |
| 33.3% | 25.0% | $1,813,333.33 | $453,333.33 |
| 50.0% | 33.3% | $2,040,000.00 | $680,000.00 |
| 100.0% | 50.0% | $2,720,000.00 | $1,360,000.00 |
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Guide: Markup vs margin
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Estimates only. Results depend on your inputs.
Formulas
- Gross profit = revenue − direct costs
- Gross margin % = gross profit ÷ revenue
Worked example
Illustrative example. Numbers are made up to show the math.
Revenue of $250,000.00 and direct costs of $160,000.00 give a gross profit of $90,000.00 and a gross margin of 36.00%.
How to use it
- Enter revenue for one period.
- Enter matching cost of goods sold.
- Read gross profit and gross margin, then check overhead separately.
Read the explainer
Questions owners ask
What counts as direct cost?
Usually materials, direct labor, subcontractors and job-specific equipment. Your accountant decides the exact lines for your books; use the same definition every period.
What is the difference between gross margin and net margin?
Gross margin subtracts only direct costs. Net margin also subtracts overhead such as rent, office pay, insurance and interest, so it is always lower.
What is the difference between gross margin and markup?
Gross margin divides gross profit by revenue; markup divides it by cost. To convert between them, use the markup calculator.
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Sources
No external research cited. Calculations and illustrative assumptions are shown above; this is not evidence of a real owner outcome.
Educational content, not tax, legal or investment advice.
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