Profit Margin Calculator

How to use Profit Margin Calculator

1. Choose a mode: profit from cost and price, price from desired margin, or price from desired markup.
2. Enter your cost.
3. Enter the selling price, or the margin or markup you want.
4. Read the profit, margin, markup or required selling price.

Margin versus markup

These two words are often mixed up, and the mistake can quietly cost a business money. Profit is the selling price minus the cost. Profit margin expresses that profit as a share of the price you charge, so it tells you how much of each sale you keep. Markup expresses the same profit as a share of what the item cost you, so it tells you how much you add on top of cost.

Because the denominators differ, markup is always larger than margin for the same sale. If you set a price by adding 40 percent to cost, you will not earn a 40 percent margin; you will earn about 28.6 percent. This tool shows both numbers so you can price with confidence.

Formulas and worked example

Profit = price − cost. Margin = profit ÷ price × 100. Markup = profit ÷ cost × 100. Price from margin m: price = cost ÷ (1 − m). Price from markup k: price = cost × (1 + k).

Example: cost 60, price 100. Profit = 40, margin = 40 ÷ 100 = 40 percent, markup = 40 ÷ 60 = 66.67 percent. To earn a 40 percent margin on a cost of 60, price = 60 ÷ 0.6 = 100. To apply a 40 percent markup, price = 60 × 1.4 = 84, which gives a margin of 28.57 percent.

Tips and limits

Use the result as one input to pricing, along with competitors, demand and the value customers see in your product.

• Include every cost that belongs to the sale (materials, labour, packaging, shipping, payment fees) or the margin will be overstated.
• This is a per-item calculation; overheads and taxes are not included.
• Discounts reduce margin faster than you might expect, so recalculate after any discount.
• Gross margin and net margin are different; this tool shows whatever the cost you enter represents.
• Estimate only. It is not accounting or tax advice.

Why use this profit margin calculator tool

• Margin and markup. See both numbers side by side so they are not confused.
• Reverse pricing. Find the price that gives a target margin or markup.
• Clear checks. Rejects an impossible margin of 100 percent or more.
• Private. No data is sent anywhere.

Frequently asked questions

More free tools