Profit Margin Calculator
This profit margin calculator shows how much of every sales dollar you keep. Enter revenue and cost to get the gross margin, the gross profit and the equivalent markup; add operating expenses to see the margin left after overhead. Or start from the margin you want and get the selling price that delivers it. It works for a single product or for a whole month or year of sales.
Updated
Results
- Gross profitRevenue or price minus cost
- Equivalent markupGross profit as a share of cost
- Net margin (after expenses)Shown when you enter operating expenses
- Net profit (after expenses)Revenue minus cost and operating expenses
Results are estimates. See the methodology below.
How to use the calculator
- Choose a mode. Margin analyzes a price or sales figure you already have; Price finds the price for a margin you choose.
- Cost: the cost of goods sold, meaning what the product or the sold inventory cost you (purchase price, materials, direct labor).
- Revenue (Margin mode): the selling price of one unit, or total net sales for the period.
- Target margin (Price mode): the gross margin you want, below 100%.
- Operating expenses (Margin mode, advanced options): rent, salaries, marketing and other overhead for the same period or unit.
Keep cost, revenue and expenses on the same basis: all per unit, or all for the same month or year. The net margin and net profit lines appear only when you enter operating expenses above zero.
Formulas
Gross profit = Revenue − CostGross margin = Gross profit ÷ Revenue × 100Markup = Gross profit ÷ Cost × 100Price for a target margin = Cost ÷ (1 − Margin)Net profit = Revenue − Cost − Operating expensesNet margin = Net profit ÷ Revenue × 100
In SEC terms, revenue minus cost of sales is gross profit (sometimes itself called gross margin), and gross profit minus operating expenses is operating income. So if you enter only operating expenses, the “net” line is really your operating margin. If you also include interest and income taxes in expenses, it becomes the bottom-line net profit margin.
Margin vs. markup
Both describe the same dollars of profit, but margin divides by the selling price and markup by the cost. Our markup calculator starts from cost and a markup percentage; this page starts from revenue or a target margin, which is how financial statements, lenders and most benchmarks express profitability. For the same cost of $100:
| Gross margin | Selling price | Markup |
|---|---|---|
| 10% | $111.11 | 11.11% |
| 20% | $125.00 | 25% |
| 25% | $133.33 | 33.33% |
| 30% | $142.86 | 42.86% |
| 40% | $166.67 | 66.67% |
| 50% | $200.00 | 100% |
| 60% | $250.00 | 150% |
| 75% | $400.00 | 300% |
Margin can never reach 100% unless the cost is zero, which is why the target margin must stay below 100%. Markup has no upper limit.
Examples
1. One product
A candle costs you $18.00 to make and sells for $45.00. Gross profit is $27.00, the gross margin is 60% and the markup is 150%.
2. A month of sales with overhead
A shop has $150,000 in net sales, $84,000 cost of goods sold and $51,000 in operating expenses. Gross profit is $66,000, a gross margin of 44% (markup 78.57%). After operating expenses, $15,000 remains: a net margin of 10%.
3. Pricing for a target margin
An item costs $26.00 and you want a 35% margin. The price is $26.00 ÷ 0.65 = $40.00, giving $14.00 of profit, a 53.85% markup.
4. The classic mistake
Adding 40% to a $100 cost gives a $140 price, but the margin is only 28.57%, not 40%. To earn a 40% margin on that cost you need $166.67.
Frequently asked questions
How do I calculate profit margin?
Subtract cost from revenue, divide by revenue and multiply by 100. Selling for $45.00 something that cost $18.00: (45 − 18) ÷ 45 = 60%.
What is the difference between gross margin and net margin?
Gross margin only subtracts the cost of the goods sold. Net margin also subtracts the costs of running the business, such as rent, wages and marketing, and in the strict sense interest and taxes. In the example above the gross margin is 44% and the net margin 10%.
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a $100 cost gives a $150 price and a 33.33% margin. A 50% margin needs a $200 price, a 100% markup.
How do I find the selling price from cost and margin?
Divide the cost by one minus the margin as a decimal. For a 35% margin on a $26.00 cost: 26 ÷ 0.65 = $40.00. Use Price mode to skip the math.
Can profit margin be negative?
Yes. If an item costing $50.00 sells for $40.00, the margin is −25% and the markup −20%: you lose money on every sale before overhead.
What is a good profit margin?
It depends heavily on the industry, because a grocer and a software company have very different cost structures. Compare yourself with businesses like yours; the Census Bureau's Annual Retail Trade Survey has published gross margin tables for retail industries.
Sources
This calculator provides estimates for planning only and is not accounting or tax advice. Real profitability depends on discounts, returns, financing costs and taxes.