Gross Profit Calculator
Calculate gross profit and gross profit margin from revenue and cost of goods sold (COGS). See how much profit you make on each sale before operating expenses, taxes, and interest.
What Is Gross Profit?
Gross profit is the money left over after subtracting the direct cost of producing or buying the goods you sold. It is the first profit figure on an income statement, and it tells you whether your core product is profitable before you account for rent, salaries, marketing, and everything else.
Gross profit is not the same as net profit. Gross profit only subtracts COGS; net profit subtracts every expense. A company can have a healthy gross profit and still lose money if overheads are too high.
Gross Profit Formula
Gross Profit = Revenue − COGS
Gross Margin = (Gross Profit ÷ Revenue) × 100
- Revenue — total sales before any deductions
- COGS — direct costs: raw materials, purchase cost of goods, direct labour, packaging
- Gross profit — the dollar amount left after COGS
- Gross margin — the same figure as a percentage of revenue
What Counts as COGS?
COGS includes only costs that are directly tied to producing the goods or services you sold. Common examples:
- Retail / e-commerce — wholesale cost of the products you resold, plus inbound shipping
- Manufacturing — raw materials, direct labour, factory overhead directly tied to production
- Service business — contractor pay, direct subcontractor costs, delivery costs
- Restaurant — food ingredients, beverage cost
Not COGS: rent, salaries of admin staff, marketing, software subscriptions, insurance, bank fees. These are operating expenses and belong below the gross profit line.
Worked Example
A retailer has $50,000 in sales and $30,000 in COGS:
Gross profit = $50,000 − $30,000 = $20,000
Gross margin = ($20,000 ÷ $50,000) × 100 = 40%
For every $1 in sales, the retailer keeps 40 cents after paying for the goods, before any overheads.
Frequently Asked Questions
What is a good gross profit margin?
It varies widely by industry. Grocery and discount retail often run 20–30%. Standard retail is 30–50%. Manufacturing is 40–60%. Software and digital products can exceed 70–85% because the marginal cost of delivering one more copy is close to zero. Compare against your industry benchmark, not an arbitrary target.
What is the difference between gross profit and net profit?
Gross profit subtracts only COGS. Net profit subtracts every expense — COGS, operating expenses, interest, and taxes. Gross profit shows whether the product is profitable; net profit shows whether the whole business is.
Is gross profit the same as gross margin?
No. Gross profit is a dollar amount ($20,000). Gross margin is that amount expressed as a percentage of revenue (40%). Both describe the same thing — one in dollars, one in percent — but they're used differently. Margin lets you compare across different-sized businesses; profit tells you the actual money.
Can gross profit be negative?
Yes. If COGS exceeds revenue, gross profit is negative — you are selling each unit below cost. That is almost always unsustainable unless it is a deliberate loss-leader strategy tied to a separate revenue stream.
Does gross profit include salaries?
Only if the salary is direct labour tied to production — for example, factory workers building the product. Administrative and sales salaries are operating expenses, not COGS, and are subtracted later to calculate operating profit.
How do I increase gross profit?
Three levers: raise prices (flows directly to gross profit), reduce COGS (negotiate supplier pricing, find cheaper inputs, reduce waste and returns), or shift your product mix toward higher-margin items. Most businesses can improve gross profit more by mixing these three than by chasing more sales volume.