How to use the profit margin calculator
- 1Choose whether you want to find your margin or find a selling price.
- 2Enter your cost for one unit: what you paid the supplier, or your cost to make it.
- 3Enter your selling price, or the margin you want to earn.
- 4Read your profit, margin and markup. Change any number and the result updates instantly.
What profit margin means
Profit margin is the share of the selling price you keep as profit. If you sell something for $100 and it cost you $60, you keep $40, which is a 40% margin.
This calculator works out gross margin: price minus the direct cost of the item. It does not include rent, wages, software or other overheads, so your net margin for the whole business will be lower.
Margin % = (Price − Cost) ÷ Price × 100
Margin and markup are not the same
Markup is profit as a share of cost; margin is profit as a share of price. The same sale always has a higher markup than margin. A $60 item sold for $100 has a 40% margin but a 66.7% markup.
Mixing them up is one of the most common pricing mistakes. If you want a 40% margin and add 40% to cost, you charge $84 instead of $100 and earn a 28.6% margin.
Markup % = (Price − Cost) ÷ Cost × 100
Pricing for a target margin
To hit a margin, divide the cost by one minus the margin. For a 40% margin on a $60 cost, divide $60 by 0.6 to get $100.
Price = Cost ÷ (1 − Margin % ÷ 100)
Gross margin versus net margin
Gross margin only covers the cost of the item itself. To see whether the whole business is profitable, subtract overheads such as rent, wages, software and marketing from total gross profit. What is left, divided by revenue, is your net margin. A product can have a healthy gross margin while the business still loses money if overheads are too high.
Net margin % = (Revenue − All costs) ÷ Revenue × 100
Worked example
A shop buys a pair of headphones for $45 and wants to know what its $79 price earns.
| Cost | $45.00 |
| Selling price | $79.00 |
| Profit | $34.00 |
| Margin | 43.0% |
| Markup | 75.6% |
Each sale keeps $34, a 43% gross margin. To reach a 50% margin, the price would need to be $90.