Free Profit Margin Calculator

How to Use Our Free Profit Margin Calculator

Step 1: Enter Your Cost of Goods Sold (COGS)

Input the total dollar amount of direct costs of producing goods or providing services. Include the material and labor costs here. 

Step 2: Enter Your Selling Price

Enter the dollar price at which you sell the product or service to customers. 

Step 3: Switch to Advanced Mode (Optional)

For service-based businesses, get a more precise breakdown of your profit margin by switching to advanced mode. Here, you can enter the labor costs, material costs, and overhead costs in detail to more accurately reflect what goes into the service charge. 

For the Labor Costs, enter: 

• The number of employees needed to complete a job 
• How many hours it takes to complete a job
• The average hourly pay per employee

For the Overhead Expenses, enter: 

• All the monthly expenses your business incurs
• The total working hours an employee works per month
• The number of hours it takes in overhead for a completed job 

Step 4: View Your Results 

Once you click “Calculate” you will see three things:

1. Profit margin (%): The percentage of revenue you gain after covering all your expenses.
2. Profit ($): The dollar amount earned after expenses.
3. Markup (%): The percentage increase from the cost (labor, materials, overhead, etc.) to the selling price.

What is Profit Margin?

Profit margin is the percentage of revenue you gain after covering costs. It’s the markup of what it costs to provide or produce the product and what you charge your customers.

For business owners, calculating their costs is an important part of determining their profit margin. You need to know what goes into your goods or services in order to price them competitively and fairly. 

There are many factors that contribute to cost, like materials, labor, and overhead. For example, if you run a retail store that sells jeans, your cost isn’t just the denim itself.

The cost of your jeans includes the material (fabric, thread, hardware), the labor it takes to produce the jeans, the delivery from the production site to your store, the overhead involved in operating a store (rent, utilities, insurance), and the labor involved in selling the jeans. 

Each product you offer has its own associated expenses. Before you can make a profit, you need to cover those costs. What you charge on top of the costs becomes your profit margin, and the amount not directly related to cost is your profit.

How to Calculate Profit Margin

Let’s break down how to calculate profit margin with a simple formula: 

Profit Margin = [(Sales Price – Cost) ÷ Sales Price)] × 100

Now, we can try out the formula using the jeans example from earlier:

One of the products that Shelly sells at her store is jeans. Including materials, labor, and overhead, each pair of jeans costs approximately $35. Shelly sells one pair for $50. Let’s calculate her profit margin:

$50 Sales Price – $35 Cost = $15 Profit

($15 Profit ÷ 50 Sales Price) × 100 = 30% Profit Margin

Shelly also wants to know what the markup percentage is, which she can easily calculate:

($15 Profit ÷ $35 Cost) × 100 = 43% Markup

Remember, the profit margin is how much of your sales price is profit, while your markup percentage measures how much you increase the sales price above the cost.

Reduce Your Overhead Cost With Connecteam

The aim of your business is to generate the most profit. To do that, you either need to increase your profit margin, which can lead to overpriced goods and services for customers, or you can drill down and reduce your costs.

You can’t change the costs of material or fair labor, which means that there is the most leverage in overhead. Reduce your overhead and move your business operations to Connecteam’s management app. 

Think of what you spend the most time and money on to run your business. Is it training? Time tracking? Scheduling? With Connecteam, you can manage all of your daily operations right from your phone. 

Create & Share Schedules in Seconds 

Skip the back and forth–with Connecteam’s Scheduling feature, create and edit shifts easily and receive feedback instantly. An employee can’t make a shift? Open the shift for other employees to claim or let them find their own replacement (or add admin approval for more control). Attach checklists, notes, and documents directly to the schedule so your team can get straight to work.

Your Employee Time Clock App

There’s no more “I forgot to clock in” when your employees have Connecteam’s Time Clock right on their phones. Easily monitor attendance in real-time and send notifications to employees who haven’t clocked in yet. With Connecteam’s geofencing capabilities, make sure your team only clocks in on site, and automatically clock out employees when they leave your custom work zone. 

Make Sure Your Team Gets the Job Done

Managing tasks for your team just got easier with Connecteam’s Task Management feature. Easily create and assign tasks from your phone with all the details your employees need to know. Include checklists, images, files, and forms to tasks for clarity. Track your team’s progress from desktop or mobile to get instant visibility into your business’s day-to-day. 

Train Your Employees From Anywhere

Bring new hires up to speed faster with Connecteam’s Employee Training. Create, manage, and update custom courses that your team can complete anywhere, anytime from their mobile devices. Designed to meet your employees where they are, include text, images, files, videos, and more in your custom courses. Monitor your team’s training progress and performance to ensure consistency and compliance. 

Try Connecteam for free today!