Enter your revenue and cost to find gross profit, profit margin, and markup - the three numbers most pricing and profitability decisions come down to.
Profit Margin Calculator
LiveThe formula
$50,000 revenue on $32,000 in costs: profit = $18,000, margin = 18,000/50,000 = 36%, markup = 18,000/32,000 = 56.25%.
Step-by-step guide
- Enter your revenue (what you sold something for).
- Enter your cost (what it cost you to produce or acquire it).
- Read your margin, profit, and markup - all three describe the same sale from different angles.
Margin vs. markup - the mix-up that costs real money
These two numbers are calculated from the same profit figure but divided by a different base - margin divides by revenue, markup divides by cost - so they're never equal except when profit is zero. A 50% markup on a $40 cost gives a $60 price, but that's only a 33.3% margin, not 50%. Pricing a product to hit a "50% margin" target by simply adding 50% to cost is a common and costly mistake - the two numbers converge only as they both approach zero, and diverge more the higher the profit percentage climbs.
Common mistakes
Frequently asked questions
What's a "good" profit margin?
It varies enormously by industry - software and services often run 60-90% gross margin, while grocery retail commonly runs in the single digits to low teens. Compare your margin against others in your specific industry rather than a universal benchmark.
What's the difference between gross margin and net margin?
Gross margin (calculated here) subtracts only the direct cost of producing what was sold. Net margin subtracts all business expenses - rent, salaries, marketing, taxes, everything - giving a more complete picture of overall profitability.
How do I set a price to hit a specific margin target?
Use our Markup Calculator instead, which solves specifically for the selling price needed to hit a target margin from a known cost.
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