Profit Margin Calculator
Enter your cost and selling price to get the profit, the margin as a percentage of revenue and the markup as a percentage of cost.
How it works
Margin and markup measure the same profit against different bases. Margin divides by the selling price; markup divides by the cost. They are never equal, and confusing them is one of the most common pricing errors in small businesses.
A 50% markup is only a 33.3% margin. Buy at 100, mark up 50% to sell at 150, and the 50 profit is a third of the 150 revenue. Pricing to a target margin using the markup number leaves you short every time.
Margin is capped at 100% because profit cannot exceed revenue. Markup has no ceiling — a product costing 10 and selling for 100 carries a 900% markup and a 90% margin.
The formula
Profit
profit = selling price − cost
Margin
margin % = (profit ÷ selling price) × 100
Markup
markup % = (profit ÷ cost) × 100
Price for a target margin
price = cost ÷ (1 − margin ÷ 100)
Worked examples
| Scenario | Working | Result |
|---|---|---|
| Cost 100, sells for 150 | 50 ÷ 150 and 50 ÷ 100 | 33.3% margin, 50% markup |
| Pricing for a 40% margin on cost 60 | 60 ÷ 0.6 | Sell at 100 |
| Using 40% markup instead | 60 × 1.4 | 84 — a 28.6% margin, well short |
When you'd use it
- Setting a selling price to hit a target margin
- Checking whether a supplier deal leaves enough room
- Translating a markup instruction into an actual margin
- Comparing profitability across products
Common questions
What is the difference between margin and markup?
The base. Margin is profit as a share of the selling price; markup is profit as a share of the cost. A 50% markup is a 33.3% margin — so pricing to a margin target using the markup figure always undershoots.
How do I price for a specific margin?
Divide the cost by one minus the margin as a decimal. For a 40% margin on a cost of 60: 60 ÷ 0.6 = 100. Multiplying by 1.4 instead gives 84, which is only a 28.6% margin.
Is this gross or net margin?
Gross — it uses the direct cost of the item only. Net margin subtracts overheads, salaries, marketing and tax as well, and is always lower.