Profit Margin Calculator
Calculate profit margin percentage from cost and selling price. This calculator shows the difference between profit margin and markup, helping you price products correctly. For related calculations, try our markup calculator or break-even calculator.
How to Calculate Profit Margin
- Determine your cost price (what you paid for the product or service).
- Determine your selling price (what the customer pays).
- Subtract cost from selling price to get profit.
- Divide profit by selling price and multiply by 100 for profit margin percentage.
- Divide profit by cost price and multiply by 100 for markup percentage.
Formula
Profit = Selling Price - Cost Price
Profit Margin (%) = (Profit / Selling Price) x 100
Markup (%) = (Profit / Cost Price) x 100
Selling Price from Margin:
Selling Price = Cost / (1 - Margin/100)
Selling Price from Markup:
Selling Price = Cost x (1 + Markup/100)Example
You buy a product for $60 and sell it for $100:
Cost Price = $60
Selling Price = $100
Profit = $100 - $60 = $40
Profit Margin = ($40 / $100) x 100 = 40%
Markup = ($40 / $60) x 100 = 66.67%
Note: 40% margin is NOT the same as 40% markup.
A 40% margin means 40 cents of every dollar is profit.
A 66.67% markup means you added 66.67% on top of cost.Margin vs Markup Comparison Table
| Margin | Markup | Cost $60 Sells For | Profit |
|---|---|---|---|
| 10.00% | 11.11% | $66.67 | $6.67 |
| 15.00% | 17.65% | $70.59 | $10.59 |
| 20.00% | 25.00% | $75.00 | $15.00 |
| 25.00% | 33.33% | $80.00 | $20.00 |
| 30.00% | 42.86% | $85.71 | $25.71 |
| 33.33% | 50.00% | $90.00 | $30.00 |
| 40.00% | 66.67% | $100.00 | $40.00 |
| 50.00% | 100.00% | $120.00 | $60.00 |
| 60.00% | 150.00% | $150.00 | $90.00 |
| 75.00% | 300.00% | $240.00 | $180.00 |
Frequently Asked Questions
What is the difference between margin and markup?
Margin is profit as a percentage of selling price (revenue). Markup is profit as a percentage of cost. A 50% markup equals a 33.33% margin. Margin is always lower than markup for the same transaction because the denominator (selling price) is larger.
What is a good profit margin?
Good margins vary by industry. Retail typically sees 2-5% net margin, software 20-40%, and luxury goods 50%+. Gross margins (before overhead) are higher: retail 25-50%, manufacturing 30-50%, services 50-80%.
How do I convert between margin and markup?
Margin to Markup: Markup = Margin / (1 - Margin). Markup to Margin: Margin = Markup / (1 + Markup). Use decimal forms for these conversions (e.g., 40% = 0.40).
What is gross margin vs net margin?
Gross margin considers only direct costs (COGS). Net margin accounts for all expenses including overhead, taxes, and interest. A business might have 60% gross margin but only 15% net margin after all expenses.
Can profit margin be negative?
Yes, a negative margin means you are selling below cost (at a loss). This might happen during clearance sales, market penetration pricing, or when costs unexpectedly increase above the selling price.