Profit Margin Calculator
Calculate profit margin, markup percentage, and profit from cost and selling price. Understand your pricing instantly.
What is Profit Margin Calculator?
A profit margin calculator determines the percentage of revenue that becomes profit after accounting for costs. It calculates gross margin ((revenue - cost) / revenue × 100), which is the most fundamental metric in business. Understanding margins helps you price products correctly, evaluate business health, compare profitability across products or services, and make informed decisions about which offerings are worth pursuing. A healthy margin varies by industry — retail typically operates at 2-10%, software at 60-80%, and services at 15-40%.
How It Works
Enter revenue (selling price) and cost. The tool calculates margin percentage, markup percentage, and gross profit. Margin = (Revenue - Cost) / Revenue × 100. Markup = (Revenue - Cost) / Cost × 100. These are often confused: a product bought for $60 and sold for $100 has a 40% margin but a 66.7% markup. The tool shows both clearly. You can also reverse-calculate — enter a target margin to find the required selling price, or enter cost and selling price to find the margin.
Examples
Cost £50, selling price £100
Profit: £50 Margin: 50% (profit / price) Markup: 100% (profit / cost)
Common Use Cases
- •Determining selling prices that achieve target profit margins for new products
- •Evaluating whether current pricing generates acceptable margins after all costs
- •Comparing margins across product lines to identify most and least profitable items
- •Calculating the impact of cost increases on margins without changing selling price
- •Converting between margin and markup for conversations with different business stakeholders
- •Setting minimum acceptable margins for sales team discount authority and negotiation limits
Frequently Asked Questions
What's the difference between margin and markup?▼
Margin is profit as % of revenue. Markup is profit as % of cost. Same profit, different base.
What is the difference between margin and markup?▼
Margin is profit as a percentage of the selling price; markup is profit as a percentage of cost. A £50 item sold for £100 carries a 50% margin but a 100% markup. Confusing the two systematically underprices goods, which is one of the more common causes of thin retail profitability.
How do gross, operating and net margin differ?▼
Gross margin deducts only the direct cost of goods sold. Operating margin also deducts overheads such as salaries, rent and marketing. Net margin deducts everything, including interest and tax. A business can show a healthy gross margin and still lose money at the net level.
What is a good profit margin?▼
It is entirely sector-dependent, so cross-industry comparison is meaningless. Grocery retail runs on very thin net margins of a few percent at high volume, while software can exceed 20 to 30% net. Compare against your own sector and your own trend over time.
How do I convert a desired margin into a selling price?▼
Divide cost by (1 − margin). For a 40% margin on a £60 cost, the price is 60 ÷ 0.60 = £100. Adding 40% to the cost gives £84, which yields a margin of only 28.6% — the markup-versus-margin error again.
Further Reading
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