"Revenue is vanity, profit is sanity, but cash is king."
If you're pitching to investors in 2026, saying "we made $1 million in revenue" isn't enough. They want to know your margins.
Gross Profit Margin
This measures how efficient you are at producing your product.
$$ \text{Gross Margin} = \frac{\text{Revenue} - \text{COGS (Cost of Goods Sold)}}{\text{Revenue}} $$
If you sell a shoe for $100 and it costs $40 to make (materials + labor), your Gross Profit is $60. Your Gross Margin is 60%.
Why it matters: If this number is low, your business model might be broken at the core. No amount of marketing can fix a product that costs too much to make.
Net Profit Margin
This is the bottom line. It accounts for everything: Rent, marketing, salaries, taxes, and software subscriptions.
$$ \text{Net Margin} = \frac{\text{Net Income}}{\text{Revenue}} $$
If that same shoe company spends $50 on marketing and rent per shoe (allocated), the Net Profit is $10 ($60 Gross - $50 Expenses). Your Net Margin is 10%.
Improvements for 2026
- SaaS benchmark: 70-80% Gross Margin.
- E-commerce benchmark: 30-50% Gross Margin.
- Service business: 40-60% Gross Margin.
Calculate Yours Now
Are your margins healthy? Or are you bleeding cash without realizing it?
Input your Cost and Sale Price to instantly see your Markup, Gross Margin, and profit per unit.