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Profit margin calculator: how it works
Margin = (selling price − cost) ÷ selling price × 100. Selling at $100 something that costs $60 gives $40 profit and a 40% margin.
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Margin and markup formulas
Profit = price − cost. Margin = profit ÷ price × 100. Markup = profit ÷ cost × 100. Price from a target margin = cost ÷ (1 − margin ÷ 100). Price from a markup = cost × (1 + markup ÷ 100).
| Cost | Price | Profit | Margin | Markup |
|---|---|---|---|---|
| $60 | $100 | $40 | 40% | 66.67% |
| $75 | $100 | $25 | 25% | 33.33% |
| $40 | $100 | $60 | 60% | 150% |
| $80 | $100 | $20 | 20% | 25% |
How to use the profit margin calculator
- Choose whether to find the margin or the price.
- Pick the currency and enter the cost.
- Enter the selling price, or the target margin.
- Read the profit, margin and markup.
Gross, operating and net margin
This calculator gives the margin on a sale, which is a gross margin. Use the gross margin calculator for a whole period's revenue and cost of goods sold.
- Gross margin uses only the direct cost of what you sold (cost of goods sold).
- Operating margin also takes off running costs: rent, salaries, software, marketing.
- Net margin is what is left after everything, including interest and tax.
Questions people ask
How do I calculate profit margin?
Margin = (selling price − cost) ÷ selling price × 100. Selling at $100 something that costs $60 gives $40 profit and a 40% margin.
How do I price for a target margin?
Price = cost ÷ (1 − margin ÷ 100). For a 40% margin on a $60 cost: $60 ÷ 0.6 = $100. Adding 40% to cost ($84) gives only a 28.6% margin.
What is the difference between margin and markup?
Both use the same profit. Margin divides it by the selling price; markup divides it by the cost. $40 profit on a $100 price and $60 cost is a 40% margin and a 66.7% markup.
Can a margin be more than 100%?
No. Margin is a share of the selling price, so it is always below 100%. Markup can be any size: a 300% markup is a 75% margin.
What is a good profit margin?
It depends on the trade. Grocery retail runs on low single-digit net margins; software and services often have gross margins above 70%. Compare yourself with businesses like yours, and look at gross and net margin separately.