Know Your Real Margins Before You Price Anything

Gross margin measures profitability after subtracting only the direct costs of producing your product or service (COGS) from revenue. Net margin goes further — it accounts for all expenses including operating costs, interest, and taxes. Gross margin tells you how efficiently you produce; net margin tells you how much you actually keep. A business can have a 70% gross margin but a 5% net margin if overhead is high.

Margin is profit expressed as a percentage of your selling price. Markup is profit expressed as a percentage of your cost. For example, if you buy something for $50 and sell it for $100: the markup is 100% but the margin is only 50%. Confusing these two is a very common pricing mistake — always clarify which one you mean when talking to suppliers, partners, or investors.

It depends heavily on your industry. As a rough guide: a net margin below 5% is considered thin, 5–10% is fair, 10–20% is healthy, and above 20% is strong. SaaS and consulting businesses often achieve 15–25% net margins, while restaurants and construction firms typically operate at 3–7%. Use the Benchmark tab to compare your margins against industry averages specific to your sector.

EBIT stands for Earnings Before Interest and Taxes. It's your operating profit — revenue minus COGS and operating expenses, before financing costs and taxes are deducted. EBIT is useful because it lets you compare the operating performance of businesses with different tax situations or capital structures. Investors and analysts often use EBIT (or EBITDA) to evaluate core business profitability.

Enter your cost per unit or job — what it costs you to deliver the product or service — then set your desired gross margin % using the slider. The calculator will tell you the minimum price you need to charge to hit that margin. The price sensitivity table shows you what different margin targets translate to, so you can make an informed pricing decision without under- or over-pricing.

The tax is applied to your taxable income, which is EBIT minus interest expenses (floored at zero — we don't calculate tax on a loss). The formula is: Tax = max(EBIT − Interest, 0) × Tax Rate. Net profit is then EBIT minus interest minus tax. This is a simplified model for planning purposes. For accurate tax calculations, always consult a qualified accountant.

Yes — switch to the Compare tab. Enter a name, revenue, and COGS for each product or scenario and click "Add Scenario." You can add up to 6 items and see them ranked side-by-side with their gross margins highlighted. The best-performing scenario is marked with a star. This is useful for deciding which product line to prioritise or what price tier is most profitable.

No. MarginPro runs entirely in your browser — no data is sent to any server, stored in a database, or shared with third parties. Everything is calculated locally using JavaScript. Refreshing the page will reset all inputs. If you want to keep a record of your results, use the Download Report or Copy Results buttons.