Calculate gross profit and gross profit margin for your business. Free calculator for small business owners, founders, and finance teams.
Calculate gross profit and gross profit margin for your business. Free calculator for small business owners, founders, and finance teams.
Generated: 1/13/2026, 7:23:39 AM | AskSMB.io
Total sales revenue
Direct costs to produce goods or services
Revenue cannot be zero
Gross Profit
$0
Revenue minus COGS
Gross Profit Margin
0%
Profitability as a percentage
N/A
🔴 Low: < 30%
🟡 Average: 30% - 60%
🟢 Strong: > 60%
Gross profit is the profit remaining after subtracting the cost of goods sold (COGS) from total revenue. It represents the amount of money your business retains after covering direct production or acquisition costs, before accounting for operating expenses, taxes, and interest. Gross profit is a fundamental indicator of your business's production efficiency and pricing effectiveness. It shows whether you're charging enough for your products or services relative to what they cost to produce or acquire.
Gross profit only considers direct production costs (COGS) and is calculated as Revenue - COGS. Net profit is the final bottom line after all expenses, including operating expenses, interest, taxes, and depreciation. Gross profit shows how efficiently you produce or acquire products. Net profit shows overall business profitability. You can have strong gross profit but low net profit if operating expenses are too high. Both metrics are essential: gross profit for production and pricing decisions, net profit for overall business health assessment.
Gross profit is critical for several reasons: it reveals pricing effectiveness and whether you're charging enough for your products; it shows production efficiency and cost control; it helps you compare profitability across different products or services; it indicates whether you have enough margin to cover operating expenses and generate net profit; and it provides early warning signs of margin erosion from rising costs or pricing pressure. Investors and lenders use gross profit margin to assess business viability and compare companies within the same industry.
A "good" gross margin varies significantly by industry:
Focus on improving your margin over time while remaining competitive in your specific industry. Higher margins provide more cushion for operating expenses and profit.