What is a good operating margin?

A 'good' operating margin varies significantly by industry. SaaS companies typically aim for 20-40%, while retail operates on 2-5%. Manufacturing averages 10-15%. Our calculator compares your margin against your specific industry benchmark so you know exactly where you stand.

What is the operating margin formula?

Operating Margin = (Operating Income ÷ Revenue) × 100. Operating income is your revenue minus cost of goods sold (COGS) and operating expenses (like salaries, rent, and marketing). It excludes interest and taxes, showing pure operational efficiency.

What's the difference between operating margin and gross margin?

Gross margin only subtracts COGS from revenue, showing production efficiency. Operating margin goes further by also subtracting operating expenses (SG&A), revealing how efficiently you run the entire business. A company can have high gross margin but low operating margin if overhead is bloated.

Can operating margin be negative?

Yes, and it's common for growth-stage companies. A negative operating margin means operating expenses exceed gross profit. Many successful startups (including early Amazon and Uber) operated with negative margins while scaling. The key is having a clear path to profitability.

How do I improve my operating margin?

Three levers: (1) Increase prices or revenue mix toward higher-margin products, (2) Reduce COGS through supplier negotiations or efficiency gains, (3) Cut operating expenses without hurting growth. Our AI analyst can model specific scenarios for your business.

What's the difference between operating margin and EBITDA margin?

Operating margin uses operating income (EBIT), which includes depreciation and amortization. EBITDA margin adds those back, showing cash-based operational performance. EBITDA margin is typically higher and preferred by investors for capital-intensive businesses.

Operating Margin Calculator

Calculate your operating margin instantly. Compare against 50+ industry benchmarks and get AI-powered insights to improve profitability. Free, no signup.

Enter Your Values

Total Revenue*

Your total sales/revenue for the period

Operating Income (EBIT)*

Revenue minus COGS and operating expenses (before interest and taxes)

Cost of Goods Sold

Direct costs to produce your product/service

Operating Expenses

SG&A, marketing, R&D, rent, salaries

Formula

Operating Margin = (Operating Income / Revenue) × 100

Operating margin shows what percentage of each revenue dollar remains after paying for production costs AND running the business (but before interest and taxes). A 15% operating margin means you keep $0.15 from every $1 in revenue as operating profit.

Operating Margin15.0%

15.0% is solid. Healthy for most industries.

Operating Income$150,000

Total Revenue$1,000,000

Gross Margin60.0%

Gross Profit$600,000

vs SaaS Benchmark (22.5%)-7.5%

Additional Income for 20% Margin$50,000

Profit per $1 Revenue$0.15

Operating Margin Benchmarks by Industry

Financial Services25-35% — high margin sector

> 25%

SaaS / Software20-25% — typical for healthy SaaS

20% – 25%

Professional Services15-25% — knowledge work

15% – 25%

Manufacturing10-15% — capital intensive

10% – 15%

Retail / E-commerce2-5% — high volume, low margin

2% – 5%

Source: Industry benchmarks 2025

How to Calculate Operating Margin

Gather your revenue figure from your income statement
Find your operating income (EBIT) — revenue minus COGS and operating expenses
Enter both values into the calculator
Optionally add COGS and operating expenses for deeper analysis
Review your operating margin and industry comparison
Use the AI analyst for personalized improvement recommendations

Operating Margin Benchmarks by Industry

20-25%

SaaS / Software

2-5%

E-commerce / Retail

10-15%

Manufacturing

15-25%

Professional Services

10-20%

Healthcare

25-35%

Financial Services

3-9%

Restaurants / Food Service

5-10%

Construction

Source: Industry benchmarks 2025

Operating Margin Calculator

Operating Margin Benchmarks by Industry

How to Calculate Operating Margin

Operating Margin Benchmarks by Industry

Frequently Asked Questions

What is a good operating margin?

What is the operating margin formula?

What's the difference between operating margin and gross margin?

Can operating margin be negative?

How do I improve my operating margin?

What's the difference between operating margin and EBITDA margin?