Profit Margin Calculator
Compute profit, margin, markup, and selling price using various known financial metrics.
Selling an item for $100.00 with a cost of $60.00 yields a gross profit of $40.00 (40.00% margin, 66.67% markup).
Formula: Revenue - Cost
Substitution: 100.00 - 60.00 = $40.00
Formula: (Profit / Revenue) × 100
Substitution: (40.00 / 100.00) × 100 = 40.00%
Formula: (Profit / Cost) × 100
Substitution: (40.00 / 60.00) × 100 = 66.67%
Profit Margin vs. Markup
Profit is revenue minus cost. Margin expresses that profit as a percentage of the selling price (profit ÷ revenue), while markup expresses it as a percentage of the cost (profit ÷ cost).
They are easy to confuse: a $60 cost sold for $100 is a 40% margin but a 66.67% markup. Knowing both helps you price products correctly to protect your business viability and cover overheads.
Built and maintained by Meet Shah · Last updated
What this tool is used for
- Working out a selling price from a cost and a target margin.
- Converting a markup into a margin or the reverse.
- Checking whether a discount leaves any margin at all.
- Comparing two products on margin rather than absolute profit.
- Setting a price that survives a known fee.
Frequently Asked Questions
- Margin or markup — which do I have?
- Margin divides profit by the selling price; markup divides it by the cost. Cost 60, price 100: margin 40%, markup 67%. They are never equal above zero, and quoting one while meaning the other is the most reliable pricing error in retail.
- How do I convert between them?
- Markup = margin ÷ (1 − margin), and margin = markup ÷ (1 + markup). A 50% margin is a 100% markup; a 50% markup is only a 33% margin. Both formulas are worth memorising because the two numbers appear in the same conversation constantly.
- How do I price to hit a target margin?
- Price = cost ÷ (1 − margin). For a 40% margin on a £60 cost, that is 60 ÷ 0.6 = £100. Adding 40% to the cost instead gives £84, which is a 28.6% margin — the exact mistake this formula exists to prevent.
- What does a discount do to margin?
- Far more than its size suggests. A 10% discount on a product with a 40% margin removes a quarter of the profit, because the discount comes entirely out of the margin rather than being shared with the cost. At a 20% margin, the same discount halves it.
- What is a good margin?
- Entirely industry-dependent, and comparing across sectors is meaningless. Grocery retail runs on 1–3% net, software on 70–90% gross. What matters is the trend in your own numbers and whether the margin covers the overheads that the gross figure ignores.
Common errors and gotchas
- Confusing margin with markup — a 50% markup is a 33% margin, and treating them as equal loses money.
- Applying a discount to the price and assuming margin falls by the same percentage.
- Omitting variable costs such as payment fees and shipping.
- Computing margin on cost rather than on revenue, which is markup by definition.
- Setting a margin target without checking the market will bear the resulting price.