How to Calculate Sales Margin

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The sales margin is a good indication of how profitable your business is.
The sales margin is a good indication of how profitable your business is. (Image: Calculator image by Alhazm Salemi from Fotolia.com)

Your sales margin is an indication of how profitable your business is. The higher your sales margin, the more profitable your business. It's a smart number to track, and an easy calculation to perform.

Things You'll Need

  • Calculator
  • Financial reports

Select a time period, typically a month, quarter or year. All information you use from your financial reports should be from the same time period.

Total all revenue generated by sales. This will give you your total gross sales revenue.

Total all expenses related to sales. This number is your cost of sales. It should include only expenses that relate directly to sales, such as cost of goods and sales labor.

Subtract the cost of sales from the gross sales. This number represents your net profit from sales.

Divide your net profit by your gross sales. The result represents your sales margin.

Tips & Warnings

  • Don't confuse "sales margin" with "markup." They're both commonly used financial statistics relating to sales, but they represent different things.
  • Your sales margin is only as accurate as the numbers you use to calculate it.

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