Profit Margin Calculator

How to use this calculator

1. Enter your Cost, what it costs you to buy or make one item.
2. Enter your Selling price for that same item.
3. Read Profit margin, Profit and Markup in the results.
4. Use the target margin table to find the selling price that gives 10% to 70% margin on your cost.

Margin versus markup

Margin and markup both describe profit, but against different bases. Profit margin is profit as a share of the selling price. Markup is profit as a share of cost. A product that costs $40 and sells for $50 has a 20% margin but a 25% markup, because the same $10 profit is divided by a different number.

Mixing them up is the most common pricing error: adding a 50% markup gives only a 33% margin.

The formulas

Profit is price minus cost. Margin divides it by price, markup divides it by cost. To find the price for a target margin, divide cost by one minus the margin.

Margin = (Price − Cost) ÷ Price × 100

• Price = selling price per unit
• Cost = what the unit costs you
• Markup = (Price − Cost) ÷ Cost × 100
• Price for target margin m = Cost ÷ (1 − m)

Example: a $18 product sold for $45

With a cost of $18 and a price of $45, the calculator shows a profit of $27, a 60% margin and a 150% markup. Of every $45 customers pay, $27 stays with the business before overheads.

Now a thinner case: cost $40, price $50. Profit is $10, margin 20%, markup 25%. If you wanted a 50% margin on that $40 item, you would have to charge $80, which shows why low-margin products depend on volume.

Using the target margin table

Below the results, the table lists the price you need for margins from 10% to 70%, with the matching markup. For an $18 cost, a 40% margin needs a $30 price (a 66.67% markup), and a 50% margin needs $36 (a 100% markup).

Pick the margin your overheads require, then judge whether customers will accept that price. If not, the lever is cost, not wishful pricing. Pair this page with the break-even calculator to see how many sales cover your fixed costs, and the discount calculator to see what a promotion does to your margin.

Ways to improve your margin

Negotiate supplier prices or buy in larger lots, cut waste and returns, bundle products so shipping costs spread over more revenue, and raise prices on items where customers are not price sensitive. Even a small price rise lifts margin faster than the same percentage cost cut, because it applies to every sale.

Watch discounts: a 20% discount on an item with a 30% margin removes most of your profit on that sale.

Assumptions and limits

This is gross margin on a single item. Cost must include everything that varies per unit, such as materials, packaging, payment fees and shipping. Rent, salaries, marketing and taxes are not included, so a healthy gross margin does not guarantee net profit. Margins that count as good differ widely between industries; compare yourself with similar businesses.

Frequently asked questions