Profit Margin Calculator
Enter your revenue and cost to instantly see gross profit, profit margin percentage, and markup. Use it to price products, check whether a deal is worth it, and understand how much of every sale you actually keep.
How the profit margin calculator works
Profit margin tells you how much of each dollar of revenue you actually keep after paying for what you sold. It is one of the fastest ways to judge whether your pricing is healthy, and it is the number lenders, investors, and partners look at first when they size up a business. This calculator uses two simple inputs — revenue and cost — and turns them into the four figures owners care about most.
Margin % = (Gross profit ÷ Revenue) × 100
Markup % = (Gross profit ÷ Cost) × 100
Start with gross profit: subtract your cost of goods sold (COGS) from revenue. If you sell an item for $100 that cost you $60, your gross profit is $40. Divide that $40 by the $100 selling price and you get a 40% margin. Divide the same $40 by the $60 cost instead and you get a 66.7% markup. Both describe the same sale, but they answer different questions, which is why mixing them up is one of the most common pricing mistakes small business owners make.
Margin vs. markup: why the difference matters
Margin is always measured against the selling price, so it can never exceed 100%. Markup is measured against cost, so it can climb well past 100%. If you set prices by adding a fixed markup to cost but report performance as a margin, the two numbers will never match — and assuming they do can quietly erode your profitability. A 50% markup, for instance, is only a 33.3% margin. Knowing which lens you are using keeps your pricing decisions honest.
What affects your profit margin
- Cost of goods — supplier prices, shipping, and materials all feed directly into COGS and shrink your margin as they rise.
- Pricing power — the more your customers value what you offer, the more room you have to raise the selling price and widen the margin.
- Discounts and returns — every markdown lowers effective revenue, so heavy discounting can turn a healthy margin thin fast.
- Product mix — blending high-margin and low-margin items changes your overall margin even when individual prices stay the same.
Tips to protect your margin
- Review your markup and margin together so pricing changes do the work you expect.
- Track your break-even point so you know the minimum volume that keeps you profitable.
- Remember that gross margin ignores operating costs — your net margin after rent, payroll, and taxes will be lower.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit divided by the selling price (revenue), while markup is profit divided by the cost. Because the denominators differ, the two percentages are never equal. A 40% margin, for example, is the same profit as a roughly 66.7% markup.
How do I calculate gross profit margin?
Subtract your cost of goods sold from revenue to get gross profit, then divide gross profit by revenue and multiply by 100. If revenue is 100 and cost is 60, gross profit is 40 and the margin is 40%.
What is a good profit margin for a small business?
It varies widely by industry. Retail and food service often run thin single-digit to low-double-digit margins, while software and services can reach much higher. Compare your margin to peers in your industry rather than to a single universal target.
Does this include operating expenses?
This tool measures gross margin using only revenue and the direct cost of what you sell. It does not subtract rent, payroll, marketing, or taxes, so your net margin after all operating expenses will be lower.
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This calculator is for educational and informational purposes only and does not constitute financial, accounting, or tax advice. Estimates are based on the values you enter and standard margin math. Consult a qualified professional before making pricing or business decisions.