How to use the profit margin calculator
- 1Choose Profit and margin, Price from margin, or Price from markup.
- 2Enter your cost per item and either the selling price or your target percentage.
- 3Add a quantity to see totals for a whole order.
- 4Read the profit, margin and markup, with the working shown underneath.
Margin and markup are not the same
Both compare profit with something else:
- Margin compares profit with the selling price: margin = profit ÷ price × 100.
- Markup compares profit with the cost: markup = profit ÷ cost × 100.
An item that costs 40 and sells for 65 makes 25 profit. That is a 38.5% margin but a 62.5% markup. Mixing the two up is a common pricing mistake that leads to prices that are too low.
Pricing for a target margin
To hit a margin, divide the cost by (1 − margin). For a 35% margin on a 40 cost: 40 ÷ 0.65 = 61.54. Adding 35% to the cost instead (a markup) would give only 54, a margin of 26%.
What to include in cost
For gross margin, include the direct cost of each item: materials, manufacturing, shipping to you and per-sale fees. Rent, salaries and marketing are overheads, which come out of gross profit later. The Break-Even Calculator helps with those.
Frequently asked questions
What is a good profit margin?
It varies widely by industry. Groceries often run on thin margins, while software and services can be much higher. Compare with businesses like yours.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 50% markup equals a 33.3% margin.
Can margin be more than 100%?
No. Profit can never exceed the selling price, so margin is always below 100%. Markup can be any size.
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