Canonical formula calculator
Gross Profit Margin
How much of every dollar you keep before operating costs.
Worked example
How the number is worked out
A two-van plumbing company. Parts and subcontracted labour are the direct costs.
Starting from
Working
Thirty-five cents of every dollar is left after the cost of doing the work — before rent, insurance, the phone, or paying yourself. Everything the business owes has to come out of that 35 cents, not out of the $40,000.
What this tells you
Gross profit margin is the percentage of revenue left after the direct cost of producing what you sold. It is the first profitability gate — before rent, salaries, software, or marketing. A low gross margin means there is not enough room to absorb operating costs, no matter how well the rest of the business runs.
When to use it
Use this calculator whenever you change pricing, change supplier costs, or evaluate a new product line. Run it monthly to track margin trend. A small monthly slide compounds — gross margin drift is one of the most common patterns in the Blackbox case library.
What it doesn’t tell you
Gross margin ignores operating expenses, marketing spend, founder draw, and taxes. A 70% gross margin business can still be losing money. Pair this metric with operating margin, net profit margin, and burn rate to see the full picture.
Reckon it, don’t just calc it
A calculator gives you today’s number. Reckon takes your plan to make your own money and checks it against what’s real — your margin, your price, what it takes to hit the take-home you want. No AI, no guessing — the same input always gives the same answer.