Profit margin is the share of the selling price that is profit. Sell something for $100 that cost you $60 and the margin is 40%: forty cents of every dollar of revenue stays with you before overheads. This calculator turns any cost and price into the margin, the profit per unit and the equivalent markup, and can run the other way to give you the price that hits a target margin.
Margin is the number to watch for pricing decisions, discounts and negotiations with suppliers, because it is measured against revenue, the same base as your other costs. Typical gross margins run from under 10% in grocery retail to 50–80% in software and services; what matters is where yours sits against competitors and whether it is drifting.
Profit Margin and Markup Calculator
Margin and markup describe the same gap between cost and price from two different sides, and mixing them up is one of the most expensive pricing mistakes a small business can make. Margin is profit as a share of the selling price; markup is profit as a share of the cost. On a product that costs $60 and sells for $100, the profit is $40, the gross margin is 40% and the markup is 66.7%.
The margin and markup calculator works in three directions. Give it cost and price and it returns both percentages. Give it cost and a target margin and it returns the price you need to charge: $60 at a 40% margin is $60 ÷ (1 − 0.40) = $100. Give it cost and a markup and it returns the price and the margin that markup actually delivers: a 50% markup on $60 is $90, which is only a 33.3% margin.
Related Calculators
Frequently Asked Questions
What is the difference between profit margin and markup?
Margin measures profit against the selling price; markup measures the same profit against the cost. A $60 item sold for $100 has a 40% margin and a 66.7% markup. Margin can never reach 100%, while markup can be any size.
Is this gross or net profit margin?
This calculator works out gross margin: price minus the direct cost of the item. Net margin also subtracts operating expenses, interest and tax; use the net profit calculator for that.
How do I price a product for a 40% margin?
Divide the cost by 1 minus the margin: $60 ÷ (1 − 0.40) = $100. Choose the 'cost and target margin' mode and the calculator does this for you.
