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How this calculator works
Gross profit is calculated by subtracting Cost of Goods Sold (COGS) — the direct costs of delivering your product or service — from total revenue. Gross margin percentage is computed as gross profit divided by revenue multiplied by 100. Net profit takes the analysis further by subtracting all operating expenses (SaaS subscriptions, marketing, admin labor, and overhead) from gross profit. Net margin percentage is net profit divided by revenue multiplied by 100, revealing what percentage of each dollar earned actually stays in the business. Break-even revenue is the revenue level where net profit equals zero, calculated by adding COGS and operating expenses — this is the minimum your business must earn each month to avoid losing money.
Useful scenarios
- A freelance designer checking whether their project revenue covers both direct and overhead costs.
- A digital product seller benchmarking their margin against industry standards for SaaS or courses.
- A solo business owner modeling what happens to profit margin if they reduce expenses by 20%.
FAQ
What is a good profit margin?
For digital products and SaaS, gross margins of 70%–90% are common. For services (freelancing, consulting), 30%–60% is typical. Net margins above 10%–20% are generally healthy for solo businesses.
What is the difference between gross and net margin?
Gross margin only considers direct costs (COGS). Net margin includes all operating expenses like software, marketing, admin, and overhead. Gross margin tells you if your product is viable; net margin tells you if your business is profitable.
What counts as COGS vs operating expenses?
COGS = costs directly tied to delivering your product (hosting, contractor pay, materials, tools per project). Operating expenses = costs to run the business (monthly SaaS subscriptions, marketing, rent, admin labor).