Profit Margin Calculator
How to use
- Choose Margin from cost and price to see how much you earn on a sale, or Price from target margin to find what to charge.
- Enter your cost and either the selling price or the margin you want, as a percentage.
- Read the gross profit, profit margin and markup underneath. Margin and markup are different, so check which one your supplier or customer means.
How it works
Gross profit = revenue - cost.
Profit margin = gross profit ÷ revenue × 100. It tells you how many cents of every dollar of sales you keep. A product that costs 60 and sells for 100 has a 40% margin.
Markup = gross profit ÷ cost × 100. The same product has a markup of about 66.7%, because the 40 of profit is measured against the 60 of cost.
To hit a target margin, price = cost ÷ (1 - margin ÷ 100). A cost of 60 with a 40% margin gives a price of 100. Note that adding 40% to the cost would give 84, a margin of only 28.6%.
FAQ
What is the difference between margin and markup?
Both come from the same profit, but margin divides by the selling price and markup divides by the cost. Margin can never reach 100%, while markup can be any size. A 50% markup is a 33.3% margin.
What is a good profit margin?
It depends on the industry. Retail often runs on 20 to 50 percent gross margin, software can reach 80 percent or more, and grocers work on a few percent. Compare with businesses like yours instead of a single target.
Is this gross or net margin?
Gross. It only subtracts the direct cost you enter. Net margin also subtracts overheads, wages, tax and interest, so it is always lower.
Why can I not use a margin of 100% or more?
A 100% margin would mean the cost is zero, and the formula divides by zero. Negative margins are allowed and show selling below cost.