How to Calculate Profit Margin for Your Business

Introduction

A good profit margin is a difference between what you’re selling your product for and what it costs to produce that product. If a company sells a t-shirt for $30, but it only cost them $5 to make, their profit margin on that shirt would be 70%. Profit margins are often used as one way of judging how well a company is doing.

What is a profit margin?

A profit margin is the percentage of revenue that a company retains after accounting for the costs of producing and selling its products. A profit margin can be calculated by dividing a company's net income by its total revenue. This will give you a percentage that will tell you how much of each sale is being kept as profit.

How to calculate your company's profit margin

Calculating your company's profit margin is a fairly straightforward process. All you need to do is divide your net income by your total revenue. This will give you a percentage that will tell you how much of each sale is being kept as profit.

While profit margins can be a good indicator of how well a company is doing, they can also vary greatly from product to product. It's important to keep track of your company's profit margins on all of its products so that you can make changes if needed.

Conclusion

The job of a business owner is to ensure that they are profitable. One way to measure this is through the profit margin-how much money you make on each dollar in sales. To calculate your company's profit margin, take your total cost and divide it by the number of units sold for that product or service. If you're not sure about how to calculate cost, don't worry! Profit Margin Calculator can do that for you.