How to use the profit margin calculator
Choose what you already know:
- Cost and revenue shows the gross profit, the gross margin and the markup for an item you already sell.
- Cost and margin finds the selling price that gives the margin you want.
- Cost and markup finds the selling price after adding a markup to the cost.
Enter the amounts without a currency symbol and press Calculate. The result always shows all five figures: selling price, cost, gross profit, margin and markup, so you can see both percentages side by side.
Margin and markup are not the same
Both start from the same profit, price minus cost, but they divide it by different numbers:
- Margin = profit ÷ price. It tells you how much of each sale you keep.
- Markup = profit ÷ cost. It tells you how much you added on top of what you paid.
Because the price is always larger than the cost when you make a profit, the margin is always the smaller of the two. You can convert between them with markup = margin ÷ (1 − margin) and margin = markup ÷ (1 + markup).
Worked examples
An item costs 60 and sells for 100. The gross profit is 40, the margin is 40 ÷ 100 = 40% and the markup is 40 ÷ 60 = 66.67%.
To earn a 40% margin on the same 60 cost, the price is 60 ÷ (1 − 0.40) = 100. A common mistake is to add 40% to the cost instead: 60 × 1.40 = 84, which is a 40% markup but only a 24 ÷ 84 = 28.57% margin.
With a 50% markup on a cost of 60, the price is 60 × 1.50 = 90, the profit is 30 and the margin is 30 ÷ 90 = 33.33%.
Good to know
- A margin can never reach 100%, because that would need an infinite price. A markup has no upper limit: a 200% markup triples the cost.
- This is gross margin. It only counts the direct cost of the item, not rent, wages, shipping, fees or taxes, so your net margin will be lower.
- If the cost is higher than the revenue, the profit, margin and markup are negative and the sale is a loss.
- Amounts are rounded to two decimals and percentages to two decimals on screen. Treat the results as estimates for planning prices.