Free calculator
Free profit margin calculator
Turn a revenue figure into the full profit waterfall: gross profit after direct costs, operating profit after overheads, and net profit after tax. Each stage has its own margin, and each tells a different story.
Enter a period, usually one month or one year
= Rs. 500k
Direct costs of what you sold = Rs. 180k
Rent, salaries, marketing = Rs. 150k
- Gross profit
- Rs. 320,000.00
- Gross margin
- 64.0%
- Operating profit
- Rs. 170,000.00
- Operating margin
- 34.0%
- Tax at 25%
- Rs. 42,500.00
- Net profit
- Rs. 127,500.00
How the formula works
Gross profit = revenue minus cost of goods sold. Operating profit subtracts operating expenses. Net profit subtracts tax. Margins are each profit divided by revenue. A healthy business usually shows a stable gross margin and an operating margin that improves with scale.
Worked example
An agency bills Rs. 500,000 in a month. Freelancer payouts (direct costs) are Rs. 180,000, office and tools are Rs. 150,000, and the corporate rate is 25 percent. Gross margin is 64 percent, operating profit is Rs. 170,000, tax is Rs. 42,500, so net profit is Rs. 127,500, a 25.5 percent net margin.
Common mistakes
- Mixing personal and business expenses in operating costs.
- Treating one-off equipment purchases as operating expenses instead of investment.
- Ignoring that some months have extra costs such as annual software renewals.
- Reading gross margin as take-home profit; taxes and overheads still come out.
Frequently asked questions
What is a good net margin?
It varies widely by industry: software often runs above 20 percent, retail is often under 5. Compare against your own history and industry benchmarks rather than a universal number.
Why does my gross margin matter if I am profitable?
Gross margin funds everything else. If it shrinks, no amount of cost cutting below the line saves the business for long.
Does this include loss carryforward?
No, this is a single-period estimate. The full app applies carryforward month by month when enabled in the tax profile.
Related tools
Results are arithmetic on the numbers you enter, not predictions. Validate important figures with an accountant before making financial commitments.