How to calculate profit margin
Margin = (price − cost) ÷ price × 100. For a cost of $60.00 and a selling price of $100.00:
- Profit: $100.00 − $60.00 = $40.00
- Margin: $40.00 ÷ $100.00 × 100 = 40%
- Markup (profit ÷ cost instead): $40.00 ÷ $60.00 × 100 = 66.67%
Margin vs markup: what's the difference?
Margin divides profit by the selling price; markup divides the same profit by the cost. They describe the same sale from two different angles, and markup is always the larger percentage when there's a profit. To convert one to the other: markup% = margin% ÷ (100 − margin%) × 100, and margin% = markup% ÷ (100 + markup%) × 100. A 20% margin is a 25% markup; a 25% markup is a 20% margin. Pricing from the wrong one of the two is a common (and expensive) mistake -- see the markup calculator if you price from cost-plus markup instead.
Gross margin formula
Gross margin = (revenue − cost of goods sold) ÷ revenue × 100. At the product level it's the identical formula as profit margin above, just using "cost of goods sold" (COGS) as the cost. At the company level, gross margin only subtracts COGS -- it doesn't yet subtract operating expenses like rent, marketing or salaries, which a net profit margin would include further down the income statement.
Solve for price or cost instead
Use the mode switches in the calculator above to go the other direction:
- Cost + target margin → price: price = cost ÷ (1 − margin% ÷ 100). Cost $100.00 at a 20% target margin → price $125.00.
- Price + target margin → cost: cost = price × (1 − margin% ÷ 100). Price $100.00 at a 20% target margin → cost $80.00.
| Target margin | Price | Profit | Markup |
|---|---|---|---|
| 10% | $66.67 | $6.67 | 11.11% |
| 15% | $70.59 | $10.59 | 17.65% |
| 20% | $75.00 | $15.00 | 25% |
| 25% | $80.00 | $20.00 | 33.33% |
| 30% | $85.71 | $25.71 | 42.86% |
| 40% | $100.00 | $40.00 | 66.67% |
| 50% | $120.00 | $60.00 | 100% |
| 60% | $150.00 | $90.00 | 150% |
| 70% | $200.00 | $140.00 | 233.33% |
| 80% | $300.00 | $240.00 | 400% |
Table computed at a cost of $60.00. Enter your own cost above to recalculate it.
More pricing tools
- Markup calculator: price from cost-plus markup, and markup percentage from cost and price.
- Discount calculator: sale price and savings from a price and percent off, with stacked discounts and tax.
- eBay fee calculator: net payout and profit after eBay's final value and other fees.
- CBM calculator: shipping volume and chargeable weight for landed-cost pricing.
Frequently asked questions
What is the profit margin formula?
Profit margin = (selling price − cost) ÷ selling price × 100. At a cost of $60.00 and a price of $100.00: profit is $40.00, and $40.00 ÷ $100.00 × 100 = 40% margin.
What is the difference between margin and markup?
Margin is profit as a percent of the selling PRICE; markup is profit as a percent of the COST. They use the same profit dollars but different denominators, so markup is always the bigger number when there's a profit. For the same $60.00 cost and $100.00 price: margin is 40% (profit ÷ price) but markup is 66.67% (profit ÷ cost).
How do I convert margin to markup, or markup to margin?
Markup% = margin% ÷ (100 − margin%) × 100, and margin% = markup% ÷ (100 + markup%) × 100. A 20% margin equals a 25% markup; a 25% markup equals a 20% margin.
What is the gross margin formula?
Gross margin uses the same formula as profit margin, but with the cost of goods sold (COGS) as the "cost": gross margin = (revenue − COGS) ÷ revenue × 100. If a product's revenue is $100.00 and its COGS is $60.00, gross margin is 40%, exactly like the margin example above -- "gross margin" and "profit margin" are calculated the same way at the product level; the difference shows up at the company level, where gross margin excludes operating expenses that a net profit margin would include.
How do I find the selling price if I know my cost and target margin?
Price = cost ÷ (1 − margin% ÷ 100). At a cost of $100.00 and a target margin of 20%: $100.00 ÷ (1 − 0.20) = $125.00. Use the "Cost + target margin" mode above to solve this for your own numbers.
How do I find my cost if I know the price and target margin?
Cost = price × (1 − margin% ÷ 100). At a price of $100.00 and a target margin of 20%: $100.00 × (1 − 0.20) = $80.00. Use the "Price + target margin" mode above to solve this for your own numbers.
What is a good profit margin?
It varies a lot by industry: grocery and distribution businesses often run 1-5% net margin on huge volume, while software and services businesses can run 60-90%+ gross margin because there's little cost of goods sold. Retail commonly targets 40-60% gross margin (a roughly 50-100% markup) after accounting for markdowns and shrink. Compare your margin to others in your specific industry rather than to a single universal number.
Why is my markup percentage so much higher than my margin percentage?
Because markup divides profit by the smaller number (cost) and margin divides it by the larger number (price), for the same profit dollars. The gap grows as margin gets bigger: a 50% margin is a 100% markup, and a 90% margin is a 900% markup. This is one of the most common pricing mistakes -- setting a 50% "markup" when you meant a 50% "margin" leaves less profit than intended.
What's the difference between this margin calculator and the markup calculator?
This page solves for margin (profit ÷ price) first and shows the equivalent markup alongside it. The markup calculator leads with markup (profit ÷ cost) instead -- use whichever number your business actually prices from; both tools compute the same underlying cost, price and profit.
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