Quick answer: Gross Profit = Revenue − Cost of Goods Sold. Net Profit = Gross Profit − Operating Expenses. Profit Margin = Net Profit ÷ Revenue × 100. Try our free Business Profit Calculator.
Gross Profit vs Net Profit
Gross profit shows what's left after direct production costs. Net profit subtracts everything else too — rent, salaries, marketing, utilities — showing your true bottom line.
Why Profit Margin Matters More Than Raw Profit
A business earning $50,000 profit on $100,000 revenue (50% margin) is far healthier than one earning $50,000 on $1,000,000 revenue (5% margin), even though the dollar profit is identical. Margin reveals efficiency.
Frequently Asked Questions
What's a good profit margin?
It varies widely by industry — retail often runs 2-5%, software can exceed 20-30%. Compare against your specific industry benchmark.
What counts as an operating expense?
Rent, salaries, utilities, marketing, insurance, and other costs not directly tied to producing the product or service.
Is this useful for a solo freelancer too?
Yes — track your revenue against costs and time to see your true effective profit.
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