Profit Margin Calculator (with Markup)
Enter your cost and selling price to see gross profit, profit margin and markup. Or enter a target margin to find the price you should charge.
Profit margin from cost and price
What the product or job costs you to deliver.
What the customer pays (before sales tax).
Price for a target margin
Profit margin formula
Gross profit = price − cost
Profit margin = gross profit ÷ price × 100
Markup = gross profit ÷ cost × 100
Example: you buy a product for $60 and sell it for $100. Gross profit is $40. The margin is $40 ÷ $100 = 40%, and the markup is $40 ÷ $60 = 66.7%.
Margin vs markup: why the difference costs people money
Margin is profit as a share of the price. Markup is profit as a share of the cost. The same sale always has a higher markup than margin, and mixing them up is one of the most common pricing mistakes. If you want a 40% margin and add 40% to your cost, you'll actually earn a 28.6% margin.
| Markup on cost | Resulting margin |
|---|---|
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 66.7% | 40% |
| 100% | 50% |
| 150% | 60% |
How to price for a target margin
Divide your cost by (1 − target margin). For a $60 cost and a 40% target margin: $60 ÷ 0.60 = $100. The second calculator above does this for you.
Gross margin vs net margin
This calculator gives gross margin: price minus the direct cost of what you sold. Net margin also subtracts overhead such as rent, software, insurance, marketing and your own pay. A healthy gross margin has to be big enough to cover all of that and still leave a profit, which is why service businesses and software companies often target gross margins well above product resellers. Track your overhead in the income and expense tracker to see your real net margin.
Frequently asked questions
What is a good profit margin for a small business?
It depends heavily on the industry. Retail and food businesses often run on thin margins, while consulting, software and many service businesses earn much higher gross margins. Compare against businesses like yours and make sure your margin covers overhead and your own pay.
How do I calculate a 30% margin?
Divide the cost by 0.70. A product that costs $35 needs a price of $50 for a 30% margin ($15 profit ÷ $50 price).
Can profit margin be over 100%?
No. Margin is profit divided by price, so it can approach but never reach 100%. Markup has no upper limit: selling a $10 item for $50 is a 400% markup but an 80% margin.
Should I calculate margin before or after sales tax?
Before. Sales tax is collected for the state and passed on, so it isn't part of your revenue. Use the price before tax.