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Profit Margin Calculator
Gross · Operating · Net margin · Markup vs margin · Pricing tool · Updated 2026
Gross / operating / netMarkup vs marginPrice from target marginIndustry benchmarks
Enter your financials
Revenue (net sales)
Total sales after returns & discounts
₹
Cost of Goods Sold (COGS)
Direct cost of products / raw material
₹
Operating expenses (OPEX)
Rent, salaries, marketing, admin etc.
₹
Tax rate
Corporate / income tax on profits
Gross margin
40.00%
₹2.00 L profit
Operating margin
24.00%
₹1.20 L profit
Net margin
18.00%
₹90,000 profit
Profit & loss breakdown
Revenue
100%
₹5.00 L
− COGS
60.00% of revenue
−₹3.00 L
= Gross profit
40.00%
₹2.00 L
− OPEX
16.00% of revenue
−₹80,000
= Operating profit
24.00%
₹1.20 L
− Tax
25% of EBIT
−₹30,000
= Net profit
18.00%
₹90,000
Key metrics
Markup on cost
Profit over COGS
COGS / Revenue
Lower is better
OPEX / Revenue
Operating leverage
Gross profit
Revenue − COGS
EBITDA (approx.)
Operating profit
Net profit
After tax
Revenue per ₹1 of cost
Industry margin benchmarks — India 2025
| Industry | Gross margin | Net margin | Notes |
|---|---|---|---|
| Grocery / FMCG retail | 20–30% | 2–5% | High volume, low margin model |
| Apparel / fashion | 40–60% | 5–15% | High markup, but high returns/discounts |
| Software / SaaS | 70–85% | 15–30% | Near-zero COGS, high value |
| Restaurants / cafés | 60–70% | 3–9% | High gross, eaten by rent & labour |
| Pharmaceuticals | 55–70% | 15–25% | High R&D costs reduce net margin |
| Automobiles | 10–20% | 4–8% | Asset-heavy, thin margins |
| E-commerce | 25–40% | 2–8% | High fulfilment & marketing costs |
| IT services | 25–40% | 8–18% | Labour-intensive, scalable |
| Real estate developers | 20–30% | 10–20% | Long cycles, capital-intensive |
| Jewellery retail | 20–35% | 4–8% | High COGS (gold), moderate margin |
Profit Margin vs Markup — The Most Confused Terms in Business
Most small business owners use markup and margininterchangeably — but they measure completely different things, and confusing them leads to systematically underpricing your products.
Markup — % over cost
Markup = (Selling price − Cost) ÷ Cost × 100
Cost ₹100 → Sell ₹150 → Markup = 50%
Tells you how much you've added over cost. Used in pricing.
Gross margin — % of revenue
Gross margin = (Selling price − Cost) ÷ Selling price × 100
Cost ₹100 → Sell ₹150 → Gross margin = 33.3%
Tells you what % of each sale you keep. Used in financial analysis.
The critical difference
A 50% markup is NOT a 50% margin. A product that costs ₹100 and sells for ₹150 has a 50% markup but only a 33.3% gross margin. If your target is 40% gross margin, you need to sell at ₹167 (markup of 67%), not ₹140 (markup of 40%). Setting prices using markup when your target is expressed as a margin will consistently underprice your products.
Frequently asked questions
What is a good gross margin for a small business in India?▼
It depends heavily on the industry. For retail and trading businesses, gross margins of 20–35% are typical. For service businesses and software, gross margins of 50–80% are common because there are minimal direct costs. For manufacturing, 30–50% is reasonable. The most important benchmark isn't industry average but sustainability — your gross margin must be high enough to cover all operating expenses (rent, salaries, marketing) and still leave a net profit.
What is EBITDA and why do investors care about it?▼
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It's essentially operating profit before non-cash charges (depreciation, amortisation) and financing costs (interest). Investors use EBITDA because it's harder to manipulate than net profit and allows apples-to-apples comparison of companies with different debt levels, tax jurisdictions, or capital structures. An EBITDA margin of 15–20% is generally considered healthy for most Indian businesses.
How do I increase profit margins without raising prices?▼
Four levers: (1) Reduce COGS — negotiate better with suppliers, reduce waste, improve production efficiency. (2) Reduce operating expenses — automate processes, reduce headcount through efficiency, renegotiate rent and vendor contracts. (3) Improve product mix — shift sales toward higher-margin products or services. (4) Reduce returns and discounts — improve product quality and customer targeting to reduce after-sale costs. Raising prices (when demand is inelastic) is the fastest lever but requires market positioning.
What is contribution margin?▼
Contribution margin = Selling price − Variable costs per unit. It tells you how much each unit sold 'contributes' toward covering fixed costs and profit. For example: product sells at ₹500, variable cost ₹200, contribution margin = ₹300. If fixed costs are ₹3,00,000/month, you need to sell 1,000 units (₹3L ÷ ₹300) just to break even. This is the foundation of break-even analysis.