The formula
How it works
Profit margin is the share of the selling price that is profit, after paying the cost. Enter what an item costs you and what you sell it for to see the profit, the margin and the markup — three numbers that are easy to mix up.
FAQ
What’s the difference between margin and markup?
Margin is profit as a percentage of the selling price; markup is the same profit as a percentage of the cost. A 60% margin is a 150% markup — same money, different base.
Can margin be more than 100%?
No. Because profit is always part of the selling price, margin tops out below 100%. Markup, measured against cost, has no upper limit.
What counts as “cost” in this calculation?
Typically the direct cost of the item — what you paid the supplier or spent making it. Some businesses also fold in shipping, packaging or labor to get a fully loaded cost and a more realistic margin.
What margin should I aim for?
It varies widely by industry — retail often targets 20–50%, while software and services can run much higher, since there is little per-unit cost to recover. Compare against typical margins in your own sector rather than a single universal number.
How do I set a price to hit a target margin?
Rearrange the formula to \(P = C / (1 - M/100)\): divide the cost by one minus the target margin (as a decimal) to get the price you need to charge.
Does margin account for taxes or fees?
No — this calculator compares only cost and selling price. Sales tax, payment processing fees and overheads all reduce your real take-home profit beyond the margin shown here.
Why do low-margin businesses still make money?
High sales volume can make up for a thin margin per item — a grocery store might run on single-digit margins but still profit handsomely because of the sheer number of transactions.
About the margin calculator
This calculator works out your profit margin from an item’s cost and its selling price. Margin is one of the most important numbers in any business because it shows how much of each sale you actually keep. Unlike a flat profit figure, expressing it as a percentage lets you compare products of very different prices on equal terms, and spot which lines are really pulling their weight.
How to use it
Enter the cost — what you pay for the item — and the price you sell it for. The calculator shows the profit in money, the margin as a percentage of the price, and the markup as a percentage of the cost. For example, an item that costs $40 and sells for $100 makes $60 profit, a 60% margin and a 150% markup. Change the currency to match your business, and adjust the price to see the margin you would need to hit a target.
The formula
Margin is profit divided by the selling price, , where is the cost and is the price. Markup uses the same profit over the cost instead, . To work backwards from a target margin, rearrange to , which tells you the price to charge to reach that margin on a known cost.
Where it is used
Shops and manufacturers use margin to set prices that cover costs and still turn a profit, and to compare the profitability of different products. Investors read company margins to judge how efficiently a business runs, while freelancers and service providers use them to price jobs. The same idea appears in retail buying, restaurant menus and wholesale deals — anywhere a cost is marked up to a selling price.