Calculate profit margin percentage from cost and selling price. Find gross margin, net margin, and equivalent markup instantly for any product or service.
Profit margin measures the percentage of revenue that remains as profit after costs are deducted. Unlike markup, which is calculated on cost, margin is calculated on the selling price — making it the metric most commonly used in financial statements and business analysis. A 30% margin means 30 cents of every dollar in revenue is profit.
This calculator computes margin from cost and selling price, finds the selling price needed for a target margin, or determines the maximum cost you can afford at a given price and margin. It also displays the equivalent markup percentage, since businesses frequently need to switch between the two metrics.
Understanding margin is essential for evaluating business health, comparing profitability across products or services, and making informed pricing decisions. This tool serves retailers, e-commerce sellers, consultants, and any business professional who needs to analyze or set profit margins.
Entrepreneurs, finance teams, and small-business owners gain a competitive edge from accurate margin data when setting prices, forecasting revenue, or managing operational costs. Save this tool and revisit it each quarter to keep your financial plans aligned with current market realities.
Margin is the standard profitability metric used in financial analysis, investor reporting, and business planning. This calculator instantly converts between margin and markup, helping you avoid the common confusion between these two metrics. It also shows how different margin targets affect your pricing, making it invaluable for pricing strategy and profitability analysis.
Margin (%) = ((Selling Price − Cost) / Selling Price) × 100. Selling Price = Cost / (1 − Margin% / 100). Cost = Selling Price × (1 − Margin% / 100). Equivalent Markup (%) = Margin / (1 − Margin). Profit = Price − Cost.
Result: 40% margin, 66.67% markup, $40 profit
A product costing $60 and sold for $100 has a margin of ($100 − $60) / $100 × 100 = 40%. The equivalent markup is 40 / (100 − 40) = 66.67%. This means 40% of the selling price is profit, or equivalently, a 66.67% premium was added to the cost.
Profit margin is the single most important metric for evaluating business profitability. While revenue shows how much money comes in, margin reveals how much you actually keep. Businesses with high revenue but low margins can be less profitable than smaller businesses with higher margins.
The most common mistake in business pricing is confusing margin with markup. A business owner targeting a "50% profit" who applies a 50% markup achieves only a 33.3% margin. To achieve a true 50% margin, a 100% markup is required. This calculator helps prevent this costly confusion by showing both metrics side by side.
There are two fundamental ways to improve margin: increase prices or decrease costs. On the price side, consider value-based pricing, bundling, premium tiers, and reducing discounts. On the cost side, negotiate with suppliers, optimize operations, reduce waste, and improve efficiency. Even small improvements of 2–3 percentage points in margin can dramatically increase total profit.
Gross margin is calculated using only the direct cost of goods sold (COGS) and reflects production/purchase profitability. Net margin subtracts all expenses — overhead, marketing, taxes, interest — from revenue. A business might have a 60% gross margin but only a 10% net margin after accounting for all operating costs.
It depends on the industry. Software companies often have 70–90% gross margins. Retail clothing averages 40–60%. Grocery stores operate on 2–5% net margins. Service businesses typically aim for 15–25% net margin. Compare against your specific industry benchmarks rather than using universal standards.
Markup = Margin / (1 − Margin). For example, a 40% margin (0.40) converts to 0.40 / 0.60 = 0.6667, or 66.67% markup. This means if you want a 40% margin, you need to mark up your cost by 66.67%.
No. Margin is a percentage of selling price, so it can never exceed 100% (which would mean zero cost). Markup, however, can exceed 100% — a 200% markup means the selling price is 3x the cost, yielding a 66.67% margin.
Margin directly shows how much of each revenue dollar is profit, making it easy to compare profitability across companies of different sizes. A company with $10M revenue and 30% margin earns $3M profit. Markup requires knowing cost to interpret, making cross-company comparison harder.
Higher margins mean you need fewer sales to break even on fixed costs. If your fixed costs are $100,000/year and your margin is 40%, you need $250,000 in revenue to break even ($100,000 / 0.40). At 20% margin, you'd need $500,000 in revenue.