A profit margin calculator helps you understand how much of your revenue is actually profit. Margin and markup are both ways to express profitability, but they use different bases — margin is a percentage of the selling price, while markup is a percentage of the cost. Confusing the two is one of the most common pricing mistakes in small business.
Calculate Margin & Markup from Cost and Price
Margin vs Markup — Side by Side
| Metric | Margin | Markup |
|---|---|---|
| Percentage | — | — |
| Based on | Selling Price | Cost Price |
| Formula | Profit / Price | Profit / Cost |
| Gross Profit ($) | — | — |
Why are margin and markup different? Margin is calculated as a share of the selling price; markup is calculated as a share of the cost. The same gross profit always produces a higher markup % than margin % because the cost base is smaller than the selling price base. For example, —.
How to Use the Profit Margin Calculator
Understanding the relationship between cost, price, margin, and markup is essential for any business that sells products or services. Our profit margin calculator supports three calculation modes so you can work from the numbers you already know.
Mode 1: Cost + Selling Price → Margin & Markup
If you already know what you paid for something and what you sell it for, this mode instantly calculates your gross profit in dollars, your profit margin percentage (profit as a share of revenue), and your markup percentage (profit as a share of cost). Enter the cost price and selling price, then click Calculate.
Mode 2: Cost + Desired Margin % → Selling Price
Use this mode when you have a target gross margin you want to hit. Enter your cost and your desired margin percentage — for example, 40% — and the tool calculates the selling price you need to charge. The formula is: Selling price = Cost ÷ (1 − Margin%). This is the correct way to price to a margin target; a very common mistake is to simply add the margin percentage to the cost, which actually gives you the markup, not the margin.
Mode 3: Cost + Desired Markup % → Selling Price
Markup pricing is simpler to calculate mentally: Selling price = Cost × (1 + Markup%). If you want a 50% markup on a $60 item, the selling price is $90. Markup is common in retail and wholesale pricing. The tool also shows you the equivalent margin percentage so you can compare the two approaches side by side.
Margin vs Markup — Why It Matters
Margin and markup describe the same profit from two different angles. Margin is profit divided by revenue; markup is profit divided by cost. Because revenue is always larger than cost (for a profitable sale), the markup percentage is always higher than the margin percentage for the same transaction. A 50% markup only corresponds to a 33.3% margin — not 50%. Confusing the two can lead to systematic under-pricing. The comparison table in the results shows both figures side by side so you can communicate clearly with suppliers, accountants, and investors who may use different conventions.
What Is Gross Profit?
Gross profit is revenue minus the direct cost of goods sold (COGS). It does not account for overheads, salaries, rent, taxes, or other operating expenses. A healthy gross margin gives you enough room to cover those fixed costs and still generate net profit. The gross profit margin percentage calculated here is a starting point — you also need to factor in your operating cost structure to determine true profitability.
For a detailed walkthrough, see our guide: Pricing Strategy for Small Business.
FAQ
What is the difference between margin and markup?
Margin (gross profit margin) is gross profit expressed as a percentage of the selling price. Markup is gross profit expressed as a percentage of the cost price. For example, if you buy an item for $60 and sell it for $100, the margin is 40% ($40 profit / $100 price) while the markup is 67% ($40 profit / $60 cost). Margin is always lower than markup for the same transaction.
How do I calculate profit margin?
Profit margin = (Selling price − Cost) / Selling price × 100. So if you sell a product for $80 that costs you $50 to make, your gross profit is $30 and your profit margin is 37.5% ($30 / $80 × 100). This percentage tells you what share of each dollar of revenue becomes profit.
How do I calculate markup percentage?
Markup % = (Selling price − Cost) / Cost × 100. Using the same example — cost $50, price $80 — the markup is 60% ($30 / $50 × 100). Markup tells you how much you are charging above your cost price, expressed as a percentage of the cost.
How do I calculate the selling price from a desired margin?
To find selling price from a target margin: Selling price = Cost / (1 − Margin%). For example, if your cost is $60 and you want a 40% margin, selling price = $60 / (1 − 0.40) = $60 / 0.60 = $100. A common mistake is confusing margin with markup — always divide by (1 minus the margin fraction), not multiply.
How do I calculate the selling price from a desired markup?
To find selling price from a target markup: Selling price = Cost × (1 + Markup%). For example, if your cost is $60 and you want a 67% markup, selling price = $60 × 1.67 = $100.20. Markup pricing is straightforward because you always start from cost and add a fixed percentage on top.
What is a good profit margin for a small business?
A 'good' margin depends heavily on the industry. Retail typically runs 20–50% gross margins. Software and digital products can exceed 70%. Manufacturing often falls between 25–35%. Service businesses vary widely, from 10% for commoditised services to 60%+ for specialised consulting. Compare your margin against industry benchmarks, not a universal standard.
Is this profit margin calculator free and private?
Yes, this tool is completely free with no signup required. All calculations happen locally in your browser — no numbers you enter are ever sent to a server or stored anywhere. You can use it as many times as you like.