Calculate gross, operating and net profit margins for your business. See all three margin types at once with color-coded health indicators.
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Compare your margins against sector averages. Net margin varies widely by capital intensity and competition.
| Industry | Gross Margin | Operating Margin | Net Margin |
|---|---|---|---|
| IT / Software Services | 30–50% | 20–35% | 15–25% |
| FMCG / Consumer Goods | 40–55% | 15–25% | 8–15% |
| Pharmaceutical | 55–70% | 20–30% | 12–20% |
| Retail / E-commerce | 20–35% | 3–8% | 2–5% |
| Manufacturing | 15–30% | 8–15% | 4–10% |
| Restaurant / F&B | 55–70% | 5–15% | 3–8% |
| Real Estate | 25–40% | 15–25% | 10–18% |
Gross Margin = (Revenue − COGS) / Revenue
Measures production/sourcing efficiency. If your gross margin is dropping, your raw material cost or manufacturing cost is rising faster than your price. Fix: renegotiate supplier terms, improve yield, raise prices.
Operating Margin = (Revenue − COGS − OpEx) / Revenue
Measures business efficiency including overhead. If gross is healthy but operating is poor, your SG&A (salaries, rent, marketing) is too high. Fix: reduce headcount, cut discretionary spend, renegotiate rent.
Net Margin = Net Profit / Revenue
The true bottom line after interest and taxes. If operating is fine but net is poor, your debt burden (interest expense) or tax rate is high. Fix: prepay high-interest loans, structure tax-efficient salary for founders.
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Gross Profit Margin = (Revenue - COGS) ÷ Revenue × 100. It measures what percentage of revenue remains after direct production costs. A high gross margin means more money available to cover operating expenses and earn profit.
It varies by industry. Retail: 2–5% net, SaaS: 70–80% gross, Manufacturing: 10–20% gross, Services: 20–40% net. Compare against industry benchmarks. Net margin of 10%+ is generally considered healthy for most businesses.
Margin is profit as % of selling price. Markup is profit as % of cost price. If cost is ₹100 and you sell at ₹150: Margin = 33.3%, Markup = 50%. They are related but not the same. Most businesses use margin for pricing strategy.
(1) Increase selling price (if price-inelastic market), (2) Reduce COGS via better supplier terms, (3) Reduce operating expenses (rent, salaries, overheads), (4) Improve product mix towards high-margin items, (5) Automate processes to reduce labour costs.
Typical net profit margins by sector in India: Software/IT services 15-25%, Pharmaceuticals 12-20%, FMCG 8-15%, Retail/e-commerce 2-5%, Manufacturing 5-10%. If your net margin is below your industry average, identify which cost layer (COGS, OpEx, interest, tax) is the culprit and compare against industry peers.
Gross Margin = (Revenue minus COGS) / Revenue - measures production efficiency. Operating Margin = (Revenue minus COGS minus OpEx) / Revenue - measures business efficiency including overheads. Net Margin = Net Profit / Revenue - the bottom line after interest and taxes. All three together show exactly where profitability is being lost.
Markup is calculated on cost; margin is calculated on revenue. If cost = Rs 80 and selling price = Rs 100: Markup = Rs 20 / Rs 80 = 25%. Gross Margin = Rs 20 / Rs 100 = 20%. They are NOT interchangeable. The formula to convert: Margin = Markup / (1 + Markup). A 50% markup equals only 33.3% gross margin.
Key levers: (1) Increase price - even a 5% price increase on Rs 10L revenue adds Rs 50,000 extra profit. (2) Reduce COGS by negotiating with suppliers and improving yield. (3) Cut fixed overheads by renegotiating rent and lease terms. (4) Reduce interest cost by prepaying high-interest loans. (5) Improve asset utilisation - more revenue from the same fixed cost base.
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