What is profit margin?
Profit margin is the share of your sales you keep as profit. The profit margin formula is profit ÷ revenue × 100. Sell $30,000 in a month, keep $2,400 after every cost, and your profit margin is 8%: you keep 8¢ of each dollar. Said on its own, profit margin usually means net margin.
How do you calculate profit margin?
Pick a profit line, divide it by net sales and multiply by 100. Net sales are your sales after discounts and returns. The line you pick names the margin. Take off only cost of goods sold and you get gross margin. Subtract running costs too for operating margin. Net margin also takes off interest and tax.
Profit margin formula: gross, operating and net
Say a month brings $30,000 in net sales.
| Margin | Profit | ÷ $30,000 |
|---|---|---|
| Gross: sales minus $13,500 of product cost | $16,500 | 55% |
| Operating: minus $13,200 of shipping, fees, ads, apps and wages | $3,300 | 11% |
| Net: minus $900 of interest and tax | $2,400 | 8% |
That last 8% is your net profit margin, the bottom line. Gross margin vs net margin walks through each cost line.
What is a good profit margin?
One that beats your own last year. NYU Stern's margins by sector, from January 2026 data, put US general retailers at a 33.18% gross margin and a 5.61% net margin. Across all 5,994 US firms in the set, net margin comes to 9.74%. Those are listed companies, not small stores.
Profit margin vs markup
Margin divides profit by the price. Markup divides it by the cost. Sell a product that cost you $20 for $40 and you have a 100% markup but a 50% margin. Doubling the cost like that is called keystone pricing. Markup vs margin converts one into the other.
Where does Shopify show profit margin?
In a product's Price section, click "Cost per item" and enter what one unit cost you. Profit and Margin then show next to that cost. Margin is price minus cost, divided by price. That is a gross margin at full price, and Shopify hides it on a taxed product when your prices include tax. The "Gross profit by product" report divides by what you actually sold for, after discounts and refunds, so the two figures can differ. Shopify's help shows a $20 T-shirt that cost $10 reading 50% on the product and 33% in the report after a 25% discount. Net margin comes from your accounts.
Search, bundles and upsells, with Sledge
Sledge does not read your product costs or work out profit margin. It runs search, filters, bundles and upsells on your storefront. On a paid plan, Growth Intelligence sums its suggested fixes into one dollar total, labeled "Est. potential": a sales estimate, not a margin.
