Profit Margin Calculator
Enter what an item costs you and what you sell it for. You get gross profit, gross margin and markup, and the selling price you would need to reach a target margin.
Enter your numbers to see the result.
Margin and markup are different things
Gross profit is selling price minus cost. Margin expresses that profit as a share of the selling price. Markup expresses it as a share of the cost. A product that costs 60 and sells for 100 earns 40 profit, which is a 40% margin but a 66.7% markup. Mixing the two up is the most common pricing error in small businesses, and it usually leads to prices set too low.
| Measure | Formula |
|---|---|
| Gross profit | Selling price − cost |
| Gross margin | Gross profit ÷ selling price × 100 |
| Markup | Gross profit ÷ cost × 100 |
| Price for target margin | Cost ÷ (1 − margin as decimal) |
Setting a price from a target margin
If you want a 45% margin on an item that costs 60, you do not add 45% to the cost. You divide cost by 0.55, which gives a price of about 109.09. Adding 45% would give only 87, which is a margin of just 31%. The target field above does the correct calculation for you.
What gross margin leaves out
Gross margin only counts the direct cost of the item. Rent, wages, marketing, shipping and payment fees all come out of that gross profit before you keep anything. Use the number as a first check, then compare it with your running costs. If you are planning discounts, see what they do to your margin with the discount calculator.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit divided by selling price. Markup is profit divided by cost. A 40% margin equals a 66.7% markup.
What is a good profit margin?
It depends on the industry. Retail often runs on lower margins than software or services. Compare yourself with businesses like yours instead of a single fixed number.
How do I price a product for a 50% margin?
Divide the cost by 0.5. A product that costs 40 needs a selling price of 80 for a 50% margin.
Does this include operating expenses?
No. It shows gross figures only. Subtract overheads such as rent, wages and fees to get net profit.