Profit Margin

Calculate gross, operating, and net margins. See where money actually leaks.

Annual revenue $480,000

Cost of goods sold $192,000

Operating expenses $168,000

Interest and other expenses $12,000

Effective tax rate 21%

Net profit margin

$0 net profit on $0 revenue

Gross margin

Gross profit $0

Operating margin

Operating profit $0

Revenue to net profit

💡 Where each dollar goes

Enter your numbers to see where each dollar of revenue ends up.

How to Use the Profit Margin Calculator

Profit margin is the share of each revenue dollar you keep. There are three, and they answer different questions. Gross margin shows whether the product itself makes money after cost of goods. Operating margin shows whether the business makes money after rent, payroll, and software. Net margin is what survives interest and tax. Most owners track revenue and the bank balance and skip everything in between, so a business can grow sales every quarter while net margin quietly slides from 12% to 4%. You cannot fix a leak you have not located.

Enter annual revenue, cost of goods sold (materials, direct labor, anything that scales with each sale), operating expenses (rent, salaries, software, marketing), and interest and other expenses. Slide your effective tax rate into place. The calculator subtracts cost of goods from revenue to get gross profit, subtracts operating expenses to get operating profit, subtracts interest, applies tax to whatever is left, and reports net profit margin as the headline figure. The two stats beneath it show gross margin and operating margin with the dollar profit at each stage, and the callout tells you where every $100 of revenue ends up and which cost line is the biggest leak.

The chart is a four-bar waterfall: revenue, gross profit, operating profit, net profit. Read it left to right and watch how fast the bars shrink. A healthy shape steps down gradually, with the net profit bar still standing at a meaningful fraction of revenue. A bad shape collapses between the first and second bar, which means cost of goods is eating the business, or between the second and third, which means overhead has outgrown the sales base. The default figures ($480,000 revenue, $192,000 cost of goods, $168,000 operating expenses) show a 60% gross margin narrowing to under 18% net.

In Predictable Income, business income is one of three streams alongside employment and investing, and the discipline is the same for each: treat the stream as a system with known inputs and outputs, not a number you hope for. Margin is the health check on that system. Knowing it lets you decide whether to raise prices, cut a cost line, or hold steady before you commit to a hire or an ad budget. Re-run it every quarter when you close the books, and again any time a supplier raises prices or you add a fixed cost.