How to calculate profit margin
Profit margin is your profit expressed as a share of the selling price. The formula is Margin % = (Price − Cost) ÷ Price × 100.
Margin % = (Price − Cost) ÷ Price × 100
Worked example: if an item costs $60 and you sell it for $100, the profit is $40. The margin is (100 − 60) ÷ 100 = 40% margin. In other words, 40 cents of every dollar you take in is profit.
Margin is always measured against the selling price, never the cost — that is what separates it from markup.
Worked examples: margin and markup across price points
Each row uses Margin % = (Price − Cost) ÷ Price × 100 and Markup % = (Price − Cost) ÷ Cost × 100. Notice how the same profit produces a smaller margin than markup, because margin divides by the larger selling price.
| Cost | Price | Profit | Margin | Markup |
|---|---|---|---|---|
| $60 | $100 | $40 | 40.0% | 66.7% |
| $75 | $100 | $25 | 25.0% | 33.3% |
| $40 | $50 | $10 | 20.0% | 25.0% |
| $20 | $30 | $10 | 33.3% | 50.0% |
| $50 | $125 | $75 | 60.0% | 150.0% |
Gross margin vs net margin
The margin shown here is gross margin — it uses only the direct cost of the product (cost of goods sold). Net margin goes further and subtracts every other expense — overhead, marketing, rent, taxes and interest — from the selling price. Net margin is always lower than gross margin and is the truer measure of how much you actually keep.
About Our Margin Calculator
Calculate profit margins instantly with our free online margin calculator. Whether you're pricing products, analyzing profitability, or comparing business metrics, our tool provides instant results showing margin, markup, and profit.
With our calculator, you can:
Calculate profit margin percentage from cost and selling price
Find the selling price needed for your desired margin
Convert between margin and markup percentages
Calculate gross profit in dollars
Margin vs Markup: What's the Difference?
Margin and markup are often confused, but they're calculated differently:
Profit Margin
Margin = (Profit ÷ Selling Price) × 100
Expressed as percentage of the selling price
Markup
Markup = (Profit ÷ Cost) × 100
Expressed as percentage of the cost price
| Markup | Margin | Example ($100 cost) |
|---|---|---|
| 15% | 13.04% | Sell at $115 |
| 20% | 16.67% | Sell at $120 |
| 25% | 20% | Sell at $125 |
| 33.33% | 25% | Sell at $133.33 |
| 50% | 33.33% | Sell at $150 |
| 100% | 50% | Sell at $200 |
Margin Formulas
Calculate Margin from Cost & Selling Price
Margin % = ((Selling Price - Cost) ÷ Selling Price) × 100
Calculate Selling Price from Cost & Margin
Selling Price = Cost ÷ (1 - Margin % ÷ 100)
Convert Markup to Margin
Margin % = (Markup % ÷ (100 + Markup %)) × 100
Convert Margin to Markup
Markup % = (Margin % ÷ (100 - Margin %)) × 100
Frequently Asked Questions
What is a good profit margin?
It depends on the industry. Grocery stores typically have 1-3% margins, clothing retail 4-13%, software companies 70-90%. A "good" margin beats your industry average.
Why is margin always less than markup?
Margin uses the larger selling price as the base, while markup uses the smaller cost. Dividing by a larger number always gives a smaller percentage.
What's the difference between gross and net margin?
Gross margin only considers direct costs (cost of goods sold). Net margin accounts for all expenses including overhead, taxes, and interest. This calculator shows gross margin.
How do I price products for a 30% margin?
Divide your cost by 0.70 (or 1 - 0.30). For example, a product that costs $70 should sell for $100 to achieve a 30% margin ($70 ÷ 0.70 = $100).
What's the difference between margin and markup?
Both measure the same profit, but against different bases. Margin = (Price − Cost) ÷ Price, so it is a share of the selling price. Markup = (Price − Cost) ÷ Cost, so it is a share of the cost. A $60 item sold at $100 has a 40% margin but a 66.7% markup — same $40 profit, two different percentages.
How do I convert markup to margin?
Use Margin % = Markup % ÷ (100 + Markup %) × 100. A 66.7% markup becomes 66.7 ÷ 166.7 × 100 ≈ 40% margin. To go the other way, Markup % = Margin % ÷ (100 − Margin %) × 100.
Use our margin calculator above to quickly determine profit margins, set competitive prices, and analyze business profitability. The calculator works for any currency and instantly converts between margin and markup.
References & methodology
Margins and markups on this page are computed with the standard identities Margin % = (Price − Cost) ÷ Price × 100 and Markup % = (Price − Cost) ÷ Cost × 100, and cross-checked against the sources below. This page is for education only and is not financial advice.