Profit Margin Calculator
If you’re in Singapore, this free profit margin calculator will help you set the best price for your products by working out the increase in revenue. If you have any questions, just give us a call.
Let’s start with filling in some numbers. You don’t have to go from top to bottom — calculate anything in any order.
How does margin calculation work?
To grow your business, it’s really important to keep track of your business and measure performance. One metric is your business’s profit margin. Once you know this, you’ll be able to plan profitability for a specific period.
Profit is the difference between the amount you spend on your products and the amount you make on your products.
When you’re working out the profit of your products, you should use gross profit margin.
For working out the profitabily of your business, you should use net profit margin.
When you intend to measure the profitability of your business, a gross profit margin is fine for determining the profitability of each item you are selling. However, you would need to calculate net profit to measure the overall profitability of your business.
Gross Profit Margin
Gross profit margin is the amount of money your business keeps after all the direct costs of producing the goods or services you sell.
The higher the gross margin, the more capital you’ll be able to keep once you’ve paid off your costs and debts.
Net Profit Margin
Net profit margin is the amount of net profit you make for every dollar of revenue you spend on things like operating expenses, interest and taxes.
Knowing your net profit margin is crucial to understanding how profitable your business is. It will also help you to identify and trim unnecessary expenses.
What is a good profit margin?
A measure of what is considered a good profit margin depends on the industry that your company is in. This is because the costs and materials needed for your products and services will differ from industry to industry. The location of your business would also play a part in determining profit margin as rental and payroll.
When it comes to measuring profitability, a gross profit margin is fine for determining the profitability of a particular item. Still, net profit margins are a better measure of overall profitability. Generally, a 10% net profit margin is considered average, a 20% margin is considered high (or “good”), and a 5% margin is low. Hitting a 5-10% net profit margin can be considered a good profit margin.
How does this Profit Margin Calculator work?
Use Osome’s simple Profit Margin Calculator to help you find a selling price that will get you a good profit margin.
To start, enter the gross cost for each product you are selling and the ideal percentage profit you want to make on the item.
Next, click “calculate”. Osome’s Profit Margin Calculator will use a profit margin formula to calculate the final price you should charge your customers so that you don’t have to do the calculation yourself. The last number suggests the price you should charge your customers to achieve that profit margin.
How to calculate gross profit margin?
The formula to calculate gross profit margin is:
Gross Profit Margin = Gross Profit / Revenue x 100
Let’s look at an example to see how this works:
FYR Company is an e-commerce shop selling customised gifts. In 2020, they gained a revenue of $700,000 from selling customised mugs. The cost of goods sold (the direct cost of producing the shirts) is $200,000.
All other operating expenses are $400k.
Now let’s calculate the gross and net profit margins for FYR Company in 2020.
Cost of Goods Sold: ($200,000)
Gross Profit: $500,000
Other Expenses: ($400,000)
Net Income: $100,000
Based on the above income statement figures, the answers are:
FYR’s gross margin equals $500,000 of gross profit divided by $700,000 of revenue, which equals 71.4%.
Net margin is $100k of net income divided by $700k of revenue, which equals 14.3%.
What is the difference between gross and net profit margin?
The gross profit margin is used to look at how much profit a single product brings to your business, while the net profit margin is used to look at the overall profitability of your business.
Let’s take a look at how to measure gross profit margin. For example, if you sell a product for $50 and it costs you $35 to make, your gross profit margin is 30% ($15 divided by $50). While this metric is good to know, it’s not the one to use when evaluating your business’s profitability.Now let’s take a look at how to calculate the net profit margin. Net profit margin looks at total sales, subtracts business expenses, and divides that figure by total revenue. For example, if your new business brought in $300,000 last year and had expenses of $250,000, your net profit margin is 16%.
What is the difference between gross margin and markup?
Gross profit margin and markup are considered separate accounting terms that use the same inputs- both use revenue and costs as part of their calculation. Both these metrics look at the same transaction yet shows different information.
So what is the difference between these two measurements? Profit margin refers to sales minus the cost of goods sold, while markup refers to the amount by which the cost of goods is increased to get the final selling price or price that you set to your customers.
These two terms will help you understand how to set prices appropriately. You want to set the correct pricing so that your business will not lose out on sales and, thus, profits.