Free tool
Profit margin calculator
Work out your profit, margin and markup from a cost and a price, or find the price you need to hit a target margin.
- Cost
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- Selling price
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- Profit per unit
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- Total profit
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Works in any currency. Enter only direct costs for gross margin, or include overheads for a figure closer to net margin. For general information only, not financial or tax advice. Terms of use.
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Margin vs markup in one example
You buy something for $60 and sell it for $100. Your profit is $40.
- Margin = $40 / $100 = 40%. It tells you how much of every sale you keep.
- Markup = $40 / $60 = 66.7%. It tells you how much you added on top of the cost.
- A common mistake is adding a 40% markup and expecting a 40% margin. You would only get 28.6%.
Common questions
What is the difference between margin and markup?
Both compare profit with a price, but against different numbers. Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost. An item that costs $60 and sells for $100 has a 40% margin but a 66.7% markup.
How do I calculate profit margin?
Subtract the cost from the selling price to get the profit, then divide the profit by the selling price and multiply by 100. For example, ($100 - $60) / $100 x 100 = 40%.
How do I set a price for a target margin?
Divide the cost by (1 minus the margin as a decimal). For a 40% margin on a $60 cost: $60 / (1 - 0.40) = $100. Adding 40% to the cost would only give $84, which is a 28.6% margin.
What is a good profit margin?
It depends on the industry. Grocery and retail often run on single-digit or low double-digit net margins, while software and professional services can be much higher. Compare yourself with businesses like yours, and look at gross margin (after direct costs) and net margin (after all costs) separately.
Is this gross margin or net margin?
Whichever costs you enter. Enter only the direct cost of the product or service to get gross margin. Include a share of overheads such as rent, wages and software to get closer to net margin.
Does sales tax count in the price?
No. Use the price before sales tax or VAT, because that tax is collected for the government and is not part of your revenue.
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