Finance tool
Profit Margin CalculatorMargin · Markup · Gross Profit
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Step-by-step breakdown
Enter your revenue and cost to instantly calculate margin, gross profit, and markup percentage. This free profit margin calculator is built for product pricing, retail margin analysis, and business profitability planning.
All calculations use standard published formulas. Results are for informational use only.
Calculation details
On $5,000.00 in revenue with a $3,500.00 cost, your gross profit is $1,500.00 - a 30% margin (strong margin), equivalent to a 42.86% markup on cost.
Profit Margin
30%
Strong margin · 42.86% markup
$1,500.00
Gross Profit
$0.300
Profit / $1 Revenue
$5,000.00
Revenue
$3,500.00
Cost (COGS)
Cost 70%Profit 30%
Getting started
How to use this profit margin calculator
This tool quickly helps you evaluate profitability.
1
Enter your revenue
The selling price per unit, or total sales for a period.
2
Enter your cost of goods sold (COGS)
The direct cost to produce or acquire the item.
3
Read your results
Instantly see your gross profit, margin %, and markup %.
The calculation
Step-by-step: how your margin was calculated
Here is exactly how your 30% margin was derived from the numbers above.
1
Calculate gross profit
Gross Profit = Revenue - Cost
= $5,000.00 - $3,500.00
Gross Profit = $1,500.00
2
Calculate profit margin %
Margin % = (Gross Profit / Revenue) x 100
= ($1,500.00 / $5,000.00) x 100
Margin = 30%
3
Calculate markup % on cost
Markup % = (Gross Profit / Cost) x 100
= ($1,500.00 / $3,500.00) x 100
Markup = 42.86%
Examples
Profit margin calculation examples
Single product
Retail Margin
Rev $80 · Cost $50
37.5%
Margin (60% markup)
Business
Monthly Revenue
Rev $45,000 · COGS $27,000
40%
Profit margin
Loss scenario
Below Cost
Rev $90 · Cost $100
-11.1%
Priced below cost
Reference
Profit margin vs. markup
Margin and markup describe the same dollar profit using different reference points. Confusing them leads to systematic under-pricing:
| Metric | Formula | Base | Example ($60 cost, $100 price) |
|---|---|---|---|
| Profit Margin % | (Revenue - Cost) / Revenue * 100 | Revenue | 40% |
| Markup % | (Revenue - Cost) / Cost * 100 | Cost | 66.7% |
Margin to markup quick reference
| Target margin % | Required markup % | Price multiplier |
|---|---|---|
| 10% | 11.1% | 1.11 |
| 20% | 25.0% | 1.25 |
| 30% | 42.9% | 1.43 |
| 40% | 66.7% | 1.67 |
| 50% | 100.0% | 2.00 |
Strategy
Tips for improving profit margin & common mistakes
Keep these points in mind when analyzing margins.
Price from target margin, not from markup
Use the reverse formula: Selling Price = Cost / (1 - Target Margin%). Working backward from a revenue-based margin is more useful for finance and investors than cost-based markup.
Track margin at the product level
Aggregate margins hide individual products that drag down overall performance. Higher-margin products should receive more marketing investment.
Mistake: Targeting a 40% markup when you need a 40% margin
A 40% markup on a $60 cost gives a $84 selling price and only a 28.6% margin. If your financial target is 40% margin, you need a 66.7% markup.
Mistake: Forgetting that gross margin isn't net profit
Gross margin only subtracts COGS. Rent, payroll, marketing, and finance costs are deducted from gross profit to arrive at net profit margin.
FAQ
Frequently asked questions
Q
What is profit margin?Profit margin is profit expressed as a percentage of revenue. It tells you how much of every dollar of revenue remains after costs are deducted. A 30% profit margin means that for every $1 in revenue, $0.30 is profit after direct costs.
Q
What is the profit margin formula?Profit Margin% = ((Revenue - Cost) / Revenue) * 100. For example, selling price $100 and cost $60: Profit Margin = ((100 - 60) / 100) * 100 = 40%.
Q
What is the difference between profit margin and markup?Margin uses revenue as the base: (Profit / Revenue) * 100. Markup uses cost as the base: (Profit / Cost) * 100. The same dollar profit results in a higher markup percentage than margin. A 33.3% margin equals a 50% markup.
Q
What is a good profit margin?Benchmarks vary widely: grocery retail 2-5%, restaurants 3-9%, manufacturing 10-25%, professional services 20-40%, software 60-80%. Compare your margin to industry-specific benchmarks rather than a universal standard.
Q
How do I calculate selling price from cost and target margin?Selling Price = Cost / (1 - Target Margin% / 100). For a $60 cost and 40% target margin: $60 / (1 - 0.40) = $60 / 0.60 = $100 selling price.
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