Product Profit Margin Calculator
Easily calculate the profitability of your products. Understand your profit and margin to make smarter pricing and business decisions.
Net Profit
$35.00
Per unit sold
Profit Margin
35.0%
Percentage of revenue that is profit
Calculation Breakdown
Understanding Your Profit Margin
Profit Margin is one of the most important metrics for any business. It represents the percentage of revenue that has turned into profit. A higher profit margin is a strong indicator of a company's financial health, pricing strategy effectiveness, and operational efficiency.
Gross vs. Net Profit Margin
This calculator helps determine the Net Profit Margin for a single product, which is more specific than a company-wide metric. It accounts for not just the direct cost of the product (Cost of Goods Sold), but also additional variable costs like shipping and transaction fees.
- Gross Profit Margin: `(Revenue - Cost of Goods Sold) / Revenue`. This shows profitability after direct production costs.
- Net Profit Margin: `(Revenue - All Expenses) / Revenue`. This provides a more complete picture by including all costs of doing business. Our calculator focuses on the per-product net profit before overheads like rent or salaries.
Why It Matters
Tracking your profit margin helps you:
- Set Smart Prices: Ensure your pricing covers all costs and leaves a healthy profit.
- Control Costs: Identify areas where costs might be too high, such as negotiating better rates with suppliers or finding more efficient shipping methods.
- Measure Efficiency: A stable or growing margin suggests your business is running efficiently. A declining margin can be an early warning sign of financial trouble.
- Make Strategic Decisions: Use margin data to decide which products to promote, which to discontinue, and where to invest resources for growth.
Regularly analyzing your profit margin empowers you to build a more resilient and profitable business.