How to calculate profit margin
- In the first panel, enter what an item costs you and what you sell it for.
- Read the gross profit, margin and markup, with the formulas below them.
- In the second panel, enter a cost and the margin you want, to see the selling price you need.
Margin vs markup
These two figures are often confused, but they answer different questions. Profit margin is profit as a percentage of the selling price: (price − cost) ÷ price × 100. Markup is profit as a percentage of the cost: (price − cost) ÷ cost × 100. If something costs 40 and sells for 65, the profit is 25, the margin is 38.46% and the markup is 62.5%.
To hit a target margin, divide the cost by one minus the margin: price = cost ÷ (1 − margin). A 35% margin on a cost of 40 needs a price of 61.54. The calculator explains why a margin of 100% or more is impossible, flags negative values, and labels results as a loss when the price is below cost. If the price or cost is zero, the margin or markup is shown as not applicable instead of an error.
Who it’s for
- Online sellers and shop owners setting prices.
- Freelancers and service providers checking project profitability.
- Students learning business and accounting basics.
- Anyone comparing supplier costs against selling prices.
Profit margin FAQ
What costs should I include?
For gross margin, include the direct cost of the product or service. For a fuller picture, add shipping, fees and packaging to the cost.
What is a good profit margin?
It varies widely by industry. Compare with businesses similar to yours rather than a single benchmark.
Does it include tax?
No. Enter amounts excluding sales tax or VAT for a true margin.