Calculate profit margin, markup percentage, and gross profit instantly for smarter pricing decisions.
Enter cost and selling price to find profit, margin, and markup.
Profit margin measures how much of each dollar of revenue becomes profit. It's essential for pricing decisions, competitive analysis, and financial health monitoring. Understanding the difference between margin and markup helps you price products effectively.
Profit as a percentage of selling price:
Profit as a percentage of cost price:
Example: Buy for $60, sell for $100.
Profit = $40
Margin = ($40 ÷ $100) × 100 = 40%
Markup = ($40 ÷ $60) × 100 = 66.67%
It depends on your industry. A 5% net margin is excellent for grocery but poor for software. Research your industry benchmarks.
Raise prices if the market allows, reduce costs through better supplier negotiations, improve efficiency, or focus on higher-margin products.
Profit margin is profit expressed as a percentage of revenue. It answers a single question: of every unit of money that comes in, how much stays with the business? Because it is a percentage rather than an absolute figure, it allows a corner shop and a multinational to be compared on the same terms. The critical distinction to grasp is between margin, calculated on the selling price, and markup, calculated on cost.
Adding a 40 percent markup to cost does not produce a 40 percent margin. A cost of 60 plus 40 percent gives 84, which is a margin of 28.6 percent, not 40. Businesses that confuse these two consistently price below their intended profitability, and because the error is proportional it never corrects itself with volume.
Step 1: Calculate the correct price
Step 2: Verify the margin
Step 3: See what the markup is
A 40 percent margin requires a 66.7 percent markup on cost — the same trade in two different languages
| Target Margin | Required Markup | Divide Cost By |
|---|---|---|
| 10% | 11.1% | 0.90 |
| 20% | 25.0% | 0.80 |
| 25% | 33.3% | 0.75 |
| 33% | 50.0% | 0.67 |
| 40% | 66.7% | 0.60 |
| 50% | 100.0% | 0.50 |
| 60% | 150.0% | 0.40 |
Notice how the gap widens as margins rise. At low margins the two figures are close enough that confusing them causes minor damage. At high margins the difference becomes severe.
| Type | What It Subtracts | What It Reveals |
|---|---|---|
| Gross margin | Cost of goods sold only | Whether the product itself is profitable |
| Operating margin | Plus rent, wages, marketing | Whether the business operation is profitable |
| Net margin | Plus interest and tax | What actually remains for owners |
A healthy 40 percent gross margin becomes 8.4 percent net once every cost is accounted for
These are broad indications only. Margins vary widely within any industry depending on scale, positioning and business model.
| Sector | Typical Net Margin |
|---|---|
| Grocery retail | 1% to 3% |
| General retail | 2% to 5% |
| Restaurants | 3% to 9% |
| Construction | 3% to 7% |
| Professional services | 10% to 20% |
| Software | 15% to 35%+ |
On a 10 percent net margin, a 1 percent price increase with no loss of volume adds roughly 10 percent to profit. Achieving the same profit increase through sales growth alone would require selling 10 percent more, with all the extra cost that entails. Small pricing corrections are usually the highest-leverage change available to a small business.
This calculator is for general business information only and is not financial or accounting advice. Margin benchmarks vary widely by industry, region and business model. Consult a qualified accountant for decisions affecting your business.