Pricing & profit

Operating Margin Calculator

Calculate operating income as a share of revenue.

Free, no sign-upRuns in your browserReviewed October 2026Formula & methodology
US dollars
US dollars
US dollars

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Operating marginExample20%
Operating income
$2,000
Total operating costs
$8,000

Understand the result

What is operating margin?

Operating margin is the share of revenue left after cost of goods sold and operating expenses such as payroll, rent and marketing, but before interest and taxes. Divide operating income by revenue: $2,000 of operating income on $10,000 of revenue is a 20% operating margin.

Operating incomeRevenue − COGS − Operating expenses
Operating marginOperating income ÷ Revenue × 100
Gross margin (for contrast)(Revenue − COGS) ÷ Revenue × 100

Example: a small agency’s quarter

  1. Revenue $10,000, direct contractor costs $6,000: gross margin 40%
  2. Software, rent and admin salaries $2,000
  3. Operating income: $10,000 − $6,000 − $2,000 = $2,000
  4. Operating margin: $2,000 ÷ $10,000 = 20%

The 20-point gap between gross and operating margin is the overhead the business carries. Watching that gap over time shows whether overhead grows faster than sales.

Common mistakes

  • Subtracting interest or income tax. Those come after operating income; including them turns the result into a net margin.
  • Reclassifying costs between periods. Moving an expense between COGS and operating expenses changes gross margin but not operating margin. Keep categories consistent.
Common questions

Operating Margin FAQ

Is operating margin the same as EBIT margin?

Usually they are very close. EBIT can include non-operating income or expenses, so check what your statements include before comparing.

How is operating margin different from net margin?

Net margin also subtracts interest, taxes and other non-operating items, so it is normally lower than operating margin.

What is a good operating margin?

It varies by industry. Compare with businesses that have a similar model, and track whether yours improves as revenue grows.

Guides for this calculation

Build context around the numbers with worked examples from our guides.

Operating Margin: Formula, Examples & How to Improve It →Contribution Margin Formula: Calculate It, Understand It & Use It →