📊 Profit Calculator

Gross Profit vs Net Profit — What's the Difference?

Gross Profit is calculated as Revenue minus Cost of Goods Sold (COGS). It shows how much money remains after accounting for the direct costs of producing or purchasing the goods or services you sold — materials, labour directly tied to production, and direct manufacturing costs. Gross Profit does not deduct operating expenses like salaries, rent, marketing, or administrative costs.

Net Profit (also called the bottom line) deducts all costs, including operating expenses, depreciation, interest on debt, and taxes. Net profit is what remains after the business has paid for everything. A business can have a healthy gross profit but a negative net profit if its operating expenses are too high relative to its revenue — this is a common position for early-stage businesses and startups.

Gross Profit Margin is expressed as a percentage: Gross Profit ÷ Revenue × 100. Industry benchmarks vary widely. Retail businesses often operate on gross margins of 20–50%. Software-as-a-service (SaaS) companies can achieve gross margins of 60–85% because their marginal cost of delivering an extra unit (another software licence) is near zero. Restaurants typically operate on 60–70% gross margins but thin net margins of 3–9% after labour and overhead.

Monitoring your gross margin over time is one of the most important financial health indicators for a business. Declining margins may indicate that supplier costs are rising, that pricing has lagged behind cost inflation, or that product mix has shifted toward lower-margin items. Rising margins often indicate pricing power, improved operational efficiency, or a shift toward higher-value products.

For a more complete picture of business profitability, pair this calculator with the Break-Even Calculator and the Markup Calculator on CalForge to understand how revenue, cost structure, and pricing interact.