Profit Margin Calculator
Enter your selling price and cost to see your margin and markup instantly — or start from cost and a target margin to find the price you need to charge.
Margin vs markup: the eternal confusion
These two numbers measure the same profit with different denominators — and mixing them up is the classic pricing mistake. Margin is profit divided by selling price: the share of each sale you keep. Markup is profit divided by cost: how much you added on top of what you paid. A 50% markup on cost is only a 33.3% margin on price, because the selling price is a bigger denominator than the cost. When a contract, an investor or a dashboard says "margin", it means margin on price — never markup.
The formulas
Worked example (forward). You sell a product for $80 and it costs you $50. Profit is $30. Margin = $30 ÷ $80 = 37.5%. Markup = $30 ÷ $50 = 60%. Same $30 of profit — margin sounds smaller because it is measured against the bigger number.
Worked example (reverse). Your cost is $50 and you need a 40% margin. Price = $50 ÷ (1 − 0.40) = $50 ÷ 0.60 = $83.33. Profit per unit is $33.33, and you can verify: $33.33 ÷ $83.33 = 40%.
Common mistakes
- Quoting markup when the client asked for margin. A 40% markup sounds like a 40% margin, but on a $140 selling price it is only a 28.6% margin. Quote the wrong one and you underprice every unit.
- Applying the margin to cost. A 40% margin does not mean cost × 1.4 — that is a 40% markup. For a true 40% margin, divide cost by 0.6, i.e. cost ÷ (1 − 0.40). The reverse mode above does this for you.
- Using a thin cost figure. Freight, packaging, transaction fees and returns all push your true cost up — and your margin down. Load every per-unit cost into the cost field, or the margin flatters you.
Frequently asked questions
Margin vs markup — what's the difference?
Margin divides profit by the selling price — it is the share of revenue you keep. Markup divides profit by cost — it is how much you add on top of what you paid. A 50% markup equals a 33.3% margin on the same numbers. Investors, contracts and dashboards talk about margin; markup is mainly a pricing shortcut. Never quote one when the other was asked for.
Can margin be over 100%?
No. Margin is profit divided by selling price, and profit cannot exceed the price you charged — 100% is the mathematical ceiling. Markup, on the other hand, can exceed 100%: a 200% markup means you tripled your cost. If someone claims a "150% margin", they mean markup.
What is a good profit margin?
It depends entirely on the industry and the business model. High-volume retail and grocery can thrive on single-digit gross margins, while software and digital products often report gross margins of 70% or more. The real test is whether your margin covers operating costs and leaves a healthy net profit — benchmark against competitors in your own category, not someone else's.
Gross margin vs net margin — what's the difference?
Gross margin is (Revenue − cost of goods sold) ÷ revenue: how profitable the product itself is. Net margin is net profit ÷ revenue: what is left after operating costs, interest and taxes — the bottom line. A healthy gross margin can still produce a thin net margin if overhead is bloated. This calculator computes gross margin.
Why does the reverse mode matter?
Most people think in cost-plus terms ("add 40%"), but business targets are usually set as margins ("we need a 40% margin"). Adding 40% to cost only yields a 28.6% margin — you miss your own target without realizing it. The reverse mode converts a margin target into the exact selling price that delivers it.