Profit Margin Calculator

Calculate gross profit, profit margin percentage and markup percentage from revenue and cost — and never confuse margin with markup again.

Inputs

Revenue (sales)

Cost of goods soldCOGS

Results

Profit margin

35.0%

Markup

53.8%

Gross profit

$3,500.00

Margin is profit ÷ revenue; markup is profit ÷ cost. A 50% markup equals only a 33.3% margin — mixing them up is one of the most expensive mistakes in pricing.

Comprehensive Guide & Formulas

By CalcSuite Editorial TeamUpdated 17 October 20269 min read

Direct Summary / AI Overview

Margin vs markup

Key Takeaways & Benchmarks

✓Margin = profit ÷ revenue; markup = profit ÷ cost — they are not interchangeable.
✓A 50% markup equals a 33.3% margin.
✓Margin can never exceed 100%; markup has no ceiling.
✓Price from margin targets: price = cost ÷ (1 − target margin).
✓Small price increases lever margins far more than equivalent cost cuts.

Margin vs markup: the crucial distinction

Margin and markup describe the same profit from opposite ends. Margin answers 'of each dollar I collect, how much do I keep?' Markup answers 'how much did I add on top of cost?' Both are legitimate — the expensive mistake is using one number where the other belongs.

The classic error: a retailer wants a 30% margin, so they mark up cost by 30%. On a $70 cost that gives a $91 price — but $21 profit on $91 revenue is only a 23% margin. They needed a 42.9% markup to hit a true 30% margin, and the shortfall compounds across every unit sold.

1
Enter revenue
Total sales for the period or product.
2
Enter cost of goods sold
Direct costs: materials, production, wholesale cost.
3
Read margin and markup
Both percentages plus gross profit dollars.
4
Sanity-check pricing
If margin is below target, raise price or cut cost — not volume.

The formulas

"Gross profit = revenue − cost"

"Margin % = (gross profit ÷ revenue) × 100"

"Markup % = (gross profit ÷ cost) × 100"

"Price from margin target = cost ÷ (1 − target margin)"

Worked example

A product sells for $10,000 in a month with $6,500 in direct costs. Gross profit is $3,500. Margin = $3,500 ÷ $10,000 = 35%. Markup = $3,500 ÷ $6,500 = 53.8%. Same $3,500 — two very different percentages, and quoting the wrong one in a pricing meeting changes the decision.

To lift margin to 40% without cutting costs, the required price is $6,500 ÷ 0.60 = $10,833 — an 8.3% price increase. Small price moves lever margins far more than equivalent cost cuts.

Protecting your margin

▸Set prices from margin targets, not from cost-plus habit.
▸Model every discount here first — small cuts need large volume gains to pay off.
▸Track margin trend monthly; a 2-point slide is an early warning, not a rounding error.
▸Separate gross margin (pricing power) from net margin (whole-business efficiency) when diagnosing problems.
▸Know your break-even point too — the Break-Even Calculator shows the sales volume your margins must support.

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Frequently asked questions

What is the difference between margin and markup?+

Margin is profit divided by revenue (the selling price); markup is profit divided by cost. On a $100 sale that cost $70: margin is 30% ($30 ÷ $100) but markup is 42.9% ($30 ÷ $70). Margin can never exceed 100%, while markup has no ceiling. Confusing the two when setting prices silently gives away profit.

How do I calculate profit margin?+

Subtract cost from revenue to get gross profit, then divide by revenue and multiply by 100. Revenue of $10,000 with $6,500 in costs gives $3,500 profit and a 35% margin. This calculator does it instantly and also shows markup for comparison.

What is a good profit margin?+

It depends entirely on the industry. Grocery stores thrive on 1–3% net margins at huge volume; software companies often exceed 70% gross margins. Rather than chasing a universal number, benchmark against competitors in your niche and watch your own trend — a falling margin is the warning sign, whatever its level. Sellers can model full fee stacks with the Etsy Profit Calculator or Shopify Profit Calculator.

How do I convert markup to margin?+

Margin = markup ÷ (1 + markup). A 50% markup converts to a 33.3% margin; a 100% markup (keystone pricing) is a 50% margin. Going the other way: markup = margin ÷ (1 − margin), so a 30% margin needs a 42.9% markup.

What is gross margin vs net margin?+

Gross margin uses only the direct cost of goods sold — it measures pricing power. Net margin subtracts everything (rent, salaries, marketing, taxes) — it measures the whole business. A healthy gross margin with a thin net margin points to bloated overhead, not a pricing problem.

Can profit margin be negative?+

Yes — when costs exceed revenue, margin goes negative. A −10% margin means you lose $10 on every $100 of sales. Occasional negative margins happen with clearance sales or loss leaders, but a sustained negative gross margin means the business model itself is broken, not just the marketing.

How does discounting affect my margin?+

Brutally. At a 30% margin, a 10% discount requires roughly 50% more unit sales to earn the same gross profit. Before running any promotion, model it here first — the Discount Calculator shows the customer-facing price while this one shows what it costs you.

Should I price based on margin or markup?+

Price from margin targets, because margin ties directly to the revenue you keep. Decide the margin the business needs (say 40%), then set price = cost ÷ (1 − 0.40). Pricing from markup feels intuitive but obscures how much of each sales dollar you actually retain.