Gross profit is one of the clearest signals of whether your pricing works. This free calculator does the sums for you: type in your revenue and your cost of goods sold, and it shows your gross profit in pounds and your gross profit margin as a percentage, updating as you type.
How to calculate gross profit
Gross profit uses one simple formula:
- Gross profit = Revenue − Cost of goods sold (COGS)
- Gross profit margin = (Gross profit ÷ Revenue) × 100
Revenue is the total money your sales brought in over a period. Cost of goods sold is the direct cost of producing or buying what you sold in that same period — stock, raw materials, and job-specific labour. It does not include overheads such as rent, salaries, insurance or marketing; those come out later when you work out net profit.
Gross profit vs net profit
People often mix these up, but they answer different questions. Gross profit tells you how profitable your product or service is on its own, before running costs. Net profit is what the business actually keeps once every other cost is taken off — rent, wages, utilities, advertising, interest and tax.
Think of it as two stages. Gross profit = revenue − COGS. Net profit = gross profit − all your overheads and tax. A business can have a healthy gross profit but still make a net loss if its overheads are too high — which is exactly why looking at both matters.
A worked example
Say a small UK homeware shop sells £50,000 of goods in a quarter. The wholesale cost of that stock — its cost of goods sold — was £20,000.
Gross profit = £50,000 − £20,000 = £30,000
Gross profit margin = (£30,000 ÷ £50,000) × 100 = 60%
So the shop keeps 60p of every £1 in sales after paying for stock. That £30,000 then has to cover rent, wages and everything else before any net profit is left.
Gross profit for pubs, bars and restaurants (food and drink)
Hospitality is where gross profit does the most work, so a gross profit calculator for pubs, bars and restaurants earns its keep. Here revenue is your till takings and cost of goods sold is what you paid for the stock behind each sale — the keg, the bottle, the ingredients on the plate. Work out food and drink gross profit line by line and you quickly see which products carry the site.
Most venues track gross profit for bars and restaurants by category, because the numbers differ a lot. A rough UK guide:
- Draught and bottled beer — often around 55% to 65% GP.
- Spirits and cocktails — typically the strongest, 70% to 80%+.
- Wine — usually 60% to 70%.
- Food — commonly 60% to 70% once wastage is counted, and tighter on menus with pricier ingredients.
To find gross profit on a single drink, take the selling price (minus VAT) and subtract what that serving cost you, then run it through the gross profit percentage calculator above. Say a pint sells for £5.00 (about £4.17 without VAT) and the beer in it cost £1.50: the gross profit is £2.67, a margin of roughly 64%. Do the same across your range and the low-GP lines that quietly drain profit stand out fast — then it is a case of adjusting price, portion or supplier.
Frequently asked questions
What is gross profit?
Gross profit is the money left from your sales once you take away the direct cost of making or buying what you sold (your cost of goods sold). It does not take off overheads like rent, wages, marketing or tax. The formula is: gross profit = revenue − cost of goods sold.
How do I calculate gross profit margin?
Gross profit margin is gross profit shown as a percentage of revenue. Divide your gross profit by your revenue, then multiply by 100. For example, £30,000 gross profit on £50,000 revenue is (30,000 ÷ 50,000) × 100 = 60%.
What is the difference between gross profit and net profit?
Gross profit only subtracts the direct cost of goods sold from revenue. Net profit goes further and subtracts every other cost too, such as rent, salaries, utilities, marketing, interest and tax. Gross profit shows how profitable your product or service is; net profit shows what the whole business actually keeps.
What counts as cost of goods sold (COGS)?
COGS is the direct cost of producing or buying the goods and services you sold. For a shop that is the wholesale price of stock; for a tradesperson it is materials and any labour on the job. It excludes indirect costs like rent, admin salaries, insurance and advertising, which belong in overheads.
Is a higher gross profit margin always better?
Generally yes, a higher margin means more room to cover overheads and still make a profit. But a good margin varies by industry. Supermarkets run on low single-digit margins with high volume, while service businesses often run 60% or more. Compare your margin to others in your own sector rather than to a universal target.
Can gross profit be negative?
Yes. If your cost of goods sold is higher than your revenue, your gross profit is negative and your margin is below zero. That means you are selling at a loss before you even pay overheads, so your prices or your costs need reviewing straight away.
How do I work out gross profit for a pub, bar or restaurant?
Use the same formula as any business: gross profit = revenue − cost of goods sold. For hospitality, revenue is your net takings (minus VAT) and cost of goods sold is what you paid for the stock you sold — the drink or the ingredients on the plate. Most pubs, bars and restaurants work out food and drink gross profit by category, since beer, spirits, wine and food each run at different margins. Popping the price and stock cost into the gross profit calculator above gives you the pounds and the percentage in one go.
What is a good gross profit percentage on drinks?
As a rough UK guide, draught and bottled beer often runs around 55% to 65%, wine about 60% to 70%, and spirits and cocktails are usually the strongest at 70% to 80% or more. Food tends to sit near 60% to 70% once wastage is counted. These are only benchmarks — run each line through the gross profit percentage calculator and compare it to venues like yours rather than to a single target.
