How to calculate profit margin

Profit margin (calculation)

Profit margin is profit divided by revenue, times 100. There is a gross profit margin (bigger) and a net profit margin (smaller).

Example of profit margin calculations

Let’s say your business makes $20,000 by cleaning offices. It costs you $8000 to provide those services, so your gross profit is $12,000. You spend another $3000 on operating expenses and $4000 on taxes, so your net profit is $5000.

Here’s how to work out your margins.