Gross Profit Calculator: Calculate Your
Gross Profit Margin
Use our free gross profit calculator to instantly determine your gross profit, gross margin percentage, and cost ratio.
Gross Profit Calculator
Calculate your gross profit and margin instantly
Input Values
Total sales revenue for the period
Direct costs of producing goods sold
Results
Enter your revenue and COGS
Results will appear here
Track Gross Profit Automatically
StoreRadar calculates gross profit in real-time for every product, order, and customer segment in your WooCommerce store.
What is Gross Profit?
Understanding the foundation of your business profitability
Gross profit is the profit remaining after you subtract the cost of goods sold (COGS) from your total revenue. It represents the money available to cover operating expenses, pay taxes, and generate net profit.
The Gross Profit Formula
Example: If your monthly revenue is $100,000 and COGS is $60,000:
Gross Profit = $100,000 - $60,000 = $40,000
Gross Margin = $40,000 / $100,000 × 100 = 40%
Gross profit is crucial because it determines how much money you have left to fund operations and generate actual profit. A healthy gross margin gives you flexibility to invest in marketing, hire staff, and weather downturns. A thin margin means even small cost increases or price drops can push you into the red.
How to Calculate Gross Profit (Step-by-Step)
Follow these four steps to calculate your gross profit and margin
Calculate Total Revenue
Sum up all sales revenue for the period. Include product sales, shipping charged to customers, and any other income directly from selling goods.
Determine COGS
Calculate your Cost of Goods Sold: Beginning Inventory + Purchases - Ending Inventory. Include all direct costs of producing or purchasing products.
Subtract COGS from Revenue
Apply the gross profit formula: Revenue - COGS = Gross Profit. This is the money left after covering direct product costs.
Calculate Gross Margin
Divide gross profit by revenue and multiply by 100 to get your gross profit margin percentage. This shows what percentage of each dollar is profit.
Gross Profit vs Other Profit Metrics
Understanding the different levels of profitability
| Metric | Definition | Formula | Example |
|---|---|---|---|
| Gross Profit | Revenue minus cost of goods sold | Revenue - COGS | $40,000 |
| Gross Margin | Gross profit as a percentage of revenue | (Gross Profit / Revenue) × 100 | 40% |
| Operating Profit | Gross profit minus operating expenses | Gross Profit - Operating Expenses | $25,000 |
| Net Profit | Profit after all expenses and taxes | Revenue - All Expenses - Taxes | $18,000 |
| Net Margin | Net profit as a percentage of revenue | (Net Profit / Revenue) × 100 | 18% |
Gross Profit Margin Benchmarks by Industry
How does your margin compare to industry standards?
Apparel & Fashion
High margins due to branding and perceived value
Beauty & Cosmetics
Premium positioning enables strong margins
Electronics
Commoditized, competitive pricing pressure
Food & Beverage
Perishability and competition affect margins
Home & Garden
Varies widely by product category
Jewelry
High perceived value and markup potential
Important Note
These benchmarks are general guidelines. Your specific gross margin depends on your business model, pricing strategy, and cost structure. A direct-to-consumer brand may have higher margins than a reseller. Track your own trends over time rather than fixating on external benchmarks.
How to Improve Your Gross Profit
Four strategies to increase your gross profit margin
Raise Prices Strategically
Test price increases on products with inelastic demand. A 10% price increase with same volume directly adds to gross profit. Use value-based pricing rather than cost-plus.
Negotiate Supplier Costs
Consolidate suppliers, negotiate volume discounts, or find alternative vendors. Even a 5% reduction in COGS can significantly improve margins.
Reduce Product Waste
Minimize returns, defects, and shrinkage. Improve quality control, optimize inventory to reduce spoilage, and address common return reasons.
Focus on High-Margin Products
Analyze gross profit by product and double down on winners. Consider discontinuing low-margin items that consume resources without generating profit.
Common Gross Profit Mistakes to Avoid
Four errors that lead to inaccurate profit calculations
Confusing Gross and Net Profit
Gross profit doesn't account for operating expenses like marketing, rent, and salaries. A high gross margin doesn't guarantee overall profitability.
Ignoring Shipping Costs
If you offer free shipping, those costs come from your gross profit. Factor in outbound shipping when analyzing true product profitability.
Not Tracking by Product
Aggregate gross margin hides which products are profitable. Some products may have negative gross profit after all direct costs are included.
Overlooking Returns and Refunds
Returns reduce revenue but often don't reduce reported COGS immediately. Factor in your return rate when calculating true gross profit.
Why Gross Profit Matters for Ecommerce
Four ways gross profit impacts your business decisions
Pricing Decisions
Know exactly how much margin you have on each product. This informs pricing strategy, discount decisions, and promotional planning without accidentally selling at a loss.
Marketing Budget
Gross profit sets the ceiling for your acquisition costs. If a product has $30 gross profit, you can't sustainably spend more than $30 to acquire that sale.
Product Mix
Analyze gross profit by product to identify winners and losers. Focus inventory and marketing spend on high-margin items that drive real profitability.
Trend Analysis
Monitor gross margin over time to catch issues early. Rising supplier costs, increased competition, or product mix shifts show up in margin trends before they hit the bottom line.
Frequently Asked Questions
Common questions about Gross Profit
Gross profit is the profit a company makes after deducting the costs directly associated with producing and selling its products (Cost of Goods Sold or COGS). It's calculated as Revenue minus COGS. Gross profit shows how efficiently a business uses labor and supplies to produce goods or services.
Gross profit margin is the percentage of revenue that exceeds the cost of goods sold. It's calculated as (Gross Profit / Revenue) × 100. For example, if your revenue is $100,000 and COGS is $60,000, your gross profit is $40,000 and your gross profit margin is 40%.
A 'good' gross profit margin varies by industry. For ecommerce, 40-60% is generally considered healthy. Luxury goods and software often see 60-80%+, while commoditized products like electronics may be 20-30%. Compare your margin to industry benchmarks and competitors for context.
Gross profit only subtracts COGS from revenue—it doesn't account for operating expenses, taxes, or interest. Net profit (or net income) is what remains after ALL expenses are deducted. Gross profit measures production efficiency; net profit measures overall profitability.
There are two main levers: increase prices or reduce COGS. You can raise prices through better positioning, bundling, or targeting higher-value customers. To reduce COGS, negotiate with suppliers, optimize production processes, reduce waste, or find alternative materials without sacrificing quality.
Gross profit determines how much money you have left to cover operating expenses (marketing, salaries, rent) and generate net profit. A healthy gross margin gives you room to invest in growth. If gross margin is too low, even high sales volume won't generate sustainable profits.
Track Gross Profit Automatically in WooCommerce
Stop calculating gross profit manually. StoreRadar tracks profitability in real-time across your entire catalog so you always know your true margins.
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