Calculate Gross Profit and Gross Margin

Excel & Google Sheets

How it works

With cost of goods in column A and revenue in column B, revenue minus cost is the gross profit — the dollars left after paying for the product itself, before rent, salaries, and marketing. Selling $10,000 of goods that cost $6,000 leaves $4,000. Dollars answer "how much did we make?", but they can't compare a $10,000 line against a $2,500 one — for that, add gross margin in the next column: =(B2-A2)/B2 divides the profit by revenue, giving 0.4 (40%) here. Together the pair shows which products earn the money and which earn it efficiently.

B2

Revenue — what the product sold for.

-A2

Minus cost of goods sold. The result is gross profit in dollars.

=(B2-A2)/B2

Optional next column: gross margin as a decimal — profit divided by revenue.

When to use it

Use it on any product, SKU, or service-line table to spot loss-makers, rank products by profitability, or feed a pricing review with real per-line numbers.

Common mistakes

• ✕Subtracting in the wrong order.

  ✓=A2-B2 with cost in A gives cost minus revenue — profitable lines show negative. Revenue comes first: =B2-A2.

• ✕Dividing margin by cost instead of revenue.

  ✓=(B2-A2)/A2 is markup (66.7% here), not gross margin (40%). Margin always divides by revenue — mixing them up overstates profitability.

• ✕Leaving shipping and payment fees out of cost.

  ✓If freight or card fees live in another column, the "gross profit" is inflated. Fold every direct cost into column A, or subtract each: =B2-A2-C2.