Free Profit Margin Calculator: Margin, Markup and Selling Price
Calculate the profit margin and markup from your cost and price, or the selling price you need for a target margin or markup. With the formulas, a margin-to-markup table and the mistakes that cost small businesses money.
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Margin and markup both describe the profit on a sale, but they divide it by different numbers, and mixing them up is one of the most common pricing mistakes. This free profit margin calculator shows both from your cost and selling price, and it works backward too: enter a target margin or markup and it gives you the price to charge.
Profit margin calculator
This is the gross margin on one product or service: price minus the direct cost. Overhead such as rent, software and your own time is not included; the break-even calculator covers those costs.
Key takeaways
- Cost $40, price $60: profit $20, a 33.3% margin and a 50% markup.
- Margin = profit ÷ price. Markup = profit ÷ cost. The same profit always gives a lower margin than markup.
- For a 30% margin on a $40 cost, charge $57.14. A 30% markup ($52) gives only a 23.1% margin.
- A 10% discount on a product with a 30% margin cuts the profit on that sale by a third.
Profit margin and markup formulas
| What you want | Formula | Example (cost $40) |
|---|---|---|
| Gross profit | Price − cost | $60 − $40 = $20 |
| Profit margin | Profit ÷ price | $20 ÷ $60 = 33.3% |
| Markup | Profit ÷ cost | $20 ÷ $40 = 50% |
| Price for a target margin | Cost ÷ (1 − margin) | $40 ÷ 0.70 = $57.14 for 30% |
| Price for a target markup | Cost × (1 + markup) | $40 × 1.50 = $60 for 50% |
| Markup from margin | Margin ÷ (1 − margin) | 0.30 ÷ 0.70 = 42.9% |
| Margin from markup | Markup ÷ (1 + markup) | 0.50 ÷ 1.50 = 33.3% |
Margin vs. markup at a glance
| Profit margin | Equals a markup of |
|---|---|
| 10% | 11.1% |
| 15% | 17.6% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100.0% |
| 60% | 150.0% |
| 75% | 300.0% |
A margin can never reach 100%, because that would mean the product cost nothing. A markup has no upper limit.
Gross margin, operating margin and net margin
- Gross margin, what this calculator shows, compares the price with the direct cost of the product or service: purchase price, materials, direct labor.
- Operating margin also subtracts overhead such as rent, software, marketing and salaries.
- Net margin is what is left after every cost, including interest and taxes, divided by revenue.
Sole proprietors see the same steps on Schedule C: gross receipts minus returns and the cost of goods sold gives gross profit, and subtracting business expenses leads to net profit. To see how many sales you need to cover your overhead, use the break-even calculator.
Pricing mistakes that eat your margin
- Confusing markup and margin: adding 30% to the cost gives a 23.1% margin, not 30%.
- Leaving out costs: include shipping, packaging, payment processing fees and marketplace commissions in the cost per unit.
- Discounting without checking: a product priced at $57.14 for a 30% margin earns $17.14. With 10% off, it sells for $51.43 and earns only $11.43, a third less profit for a tenth off the price. The discount calculator shows the sale price.
- Forgetting sales tax: sales tax you collect belongs to the state and is not part of your margin. Calculate prices before tax, then add tax with the sales tax calculator.
What is a good profit margin?
There is no single good number. Margins depend on the industry, the business model and volume: a grocery store can thrive on thin margins because it sells a lot, while software, consulting and handmade goods usually need much higher gross margins to cover their overhead. Compare yourself with businesses like yours, and check that your gross profit covers your fixed costs with room to spare.
Frequently asked questions
What is the difference between margin and markup?
Both start from the same profit. Margin divides it by the selling price, markup by the cost. A $20 profit on a $40 cost and $60 price is a 33.3% margin and a 50% markup.
How do I calculate a 30% profit margin?
Divide the cost by 0.70. For a $40 cost, the price is $40 ÷ 0.70 = $57.14, which leaves $17.14 of profit, 30% of the price.
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a $40 cost gives a $60 price and a 33.3% margin. For a 50% margin you need a 100% markup, or an $80 price.
How do I calculate profit margin in Excel or Google Sheets?
With the cost in A2 and the price in B2, the margin is =(B2-A2)/B2 and the markup is =(B2-A2)/A2. Format the cells as percentages.
Can a profit margin be negative?
Yes. If the price is below the cost, you lose money on each sale and the margin is negative. The calculator shows the loss per sale.
