# How do I calculate profit margin for my small business?

Profit margin is profit divided by sales, shown as a percent: (price minus cost) divided by price, times 100. A $100 job that costs you $80 leaves $20 of profit, a 20% margin. For the whole business, divide net profit (income minus all expenses) by income for the same month or year: $2,800 profit on $8,000 of income is a 35% margin. ProfitDrawer's free price per job calculator works with margin the same way.

Two margins are worth knowing:

- **Gross margin** = (sales minus direct costs of the work, such as materials) / sales. It shows whether each job or product is priced well.
- **Net margin** = (sales minus all expenses) / sales. It includes overhead such as insurance, phone, software and advertising.

Steps for a monthly net margin:

1. Total income for the month.
2. Total every business expense for the same month, including mileage or vehicle costs.
3. Subtract to get net profit, then divide by income.

Decide whether your own pay is in the costs. If you are a sole proprietor and do not count your time, a margin can look high while the business pays you very little. The price per job calculator includes your hourly pay as a cost first, so its margin is what the business keeps on top of paying you.

Track margin month by month; a falling margin with steady sales usually means costs are rising faster than prices.

- Source: [Price Per Job Calculator for Service Businesses](https://profitdrawer.com/tools/price-per-job-calculator.html)
- Updated: 2026-10-29
- Published: 2026-10-29
- Category: Pricing and profit
- Canonical: https://profitdrawer.com/answers/how-do-i-calculate-profit-margin-for-my-small-business.html
- Publisher: ProfitDrawer (https://profitdrawer.com)