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Profit Margin Calculator

Updated · By the CalculatorDash editorial team · How we check our maths

Quick answer

Profit margin is profit divided by selling price. If something costs $60 and sells for $100, profit is $40 and the margin is 40%. The same sale is a 66.7% markup, because markup divides profit by cost instead of price.

Profit margin

$
$

Profit margin

40%

Profit per unit
$40.00
Markup
66.67%
Total profit
$40.00
Total revenue
$100

How this calculator works

Gross profit margin tells you how much of every sale you keep after paying for the product itself. It is the number lenders, investors and buyers of a business look at first, because it shows whether the core of the business works before overheads.

Margin and markup describe the same profit from different directions. Margin compares profit with the selling price; markup compares it with cost. Mixing them up is one of the most common pricing mistakes: a 50% markup is only a 33% margin.

The formula

Profit
selling price − cost
Margin %
profit ÷ selling price × 100
Markup %
profit ÷ cost × 100

Worked example

A cafe sells a sandwich for $9.50 that costs $3.80 in ingredients and packaging. Profit is $5.70 and the margin is 5.70 ÷ 9.50 = 60%. Measured as markup it is 5.70 ÷ 3.80 = 150%.

Tips

  1. 01Include every direct cost in 'cost': materials, packaging, payment fees and shipping you pay for.
  2. 02Track margin by product, not just overall. One low-margin bestseller can hide a lot.
  3. 03To hit a target margin, use price = cost ÷ (1 − margin). For a 40% margin on a $60 cost, price at $100.

Frequently asked questions

How do you calculate profit margin?

Subtract cost from selling price to get profit, divide profit by the selling price, then multiply by 100. A $100 sale with a $70 cost has a 30% margin.

What is the difference between margin and markup?

Margin is profit as a share of the selling price. Markup is profit as a share of cost. The same $40 profit on a $60 cost and $100 price is a 40% margin and a 66.7% markup.

What is a good profit margin?

It depends on the industry. Grocery retail often runs on low single-digit net margins, while software and services can have gross margins above 70%. Compare yourself with businesses like yours.

How do I price for a specific margin?

Divide your cost by (1 − target margin). For a $25 cost and a 60% margin, the price is 25 ÷ 0.4 = $62.50.