Profit Margin Calculator
Enter a selling price and cost to see your gross profit, profit margin, and markup. Use it to check pricing on a product or service.
Margin and markup are not the same. Margin is profit as a share of the selling price. Markup is profit as a share of the cost. The same profit always gives a higher markup than margin.
How to use this tool
- 1Enter your selling price - the amount your customer pays, before any discounts.
- 2Enter your cost - include everything: materials, packaging, labour, delivery, and payment processing fees.
- 3Read the three results: gross profit (the cash difference), profit margin (profit as a % of selling price), and markup (profit as a % of cost).
- 4Adjust either number to see how a price or cost change affects your margin in real time.
Formula used
Example
Gross profit is 40. Profit margin is 40% (40 / 100). Markup is 66.67% (40 / 60). Same 40 in profit produces two different percentages depending on whether you measure against the price or the cost.
Gross profit is 480. Profit margin is 60% - a strong rate for service work. Markup is 150%. If this freelancer wants to know what to charge to hit a 60% margin from a 320 cost, they can verify it here before quoting.
Common use cases
- Checking if a new product's margin covers your overheads before you set a launch price
- Comparing your margin against industry benchmarks to see if pricing is competitive
- Quoting a freelance project and confirming the rate leaves enough profit after costs
- Reviewing a supplier's price increase and calculating the impact on your margin
- Setting a minimum acceptable selling price when running a promotion
Common mistakes
- Not including all costs - the cost field must cover everything: materials, packaging, delivery, payment fees, and any labour time. Missing a cost gives a falsely high margin.
- Confusing margin with markup - a 40% markup on a cost of 60 gives a margin of only 28.57%, not 40%. They are never the same number.
- Using revenue before returns or refunds - if 10% of orders are returned, your effective revenue is lower. Account for this before relying on the margin figure for pricing decisions.
- Treating gross profit as net profit - this calculator shows gross profit only. Operating costs, rent, salaries, and taxes are separate and will reduce your actual profit further.
Frequently asked questions
What is the difference between margin and markup?
Margin measures profit as a share of the selling price. Markup measures profit as a share of the cost. For the same product, markup is always the larger number. A 40% margin and a 40% markup result in very different prices and profits.
What is a good profit margin?
It depends heavily on your industry. Software and professional services often run 60-80% gross margins. Retail typically runs 20-50%. Manufacturing can be 10-30%. The right margin is one that covers all your operating costs and leaves enough net profit for the business to grow.
Does this include tax or payment fees?
No. It uses only the selling price and cost you enter. Payment processing fees (such as 2.9% + 30 cents on Stripe), marketplace fees, shipping, and tax are not factored in. Add all of these to your cost for an accurate real-world margin.
How do I use this to set a selling price?
Use the Markup Calculator instead, which works in the other direction: enter your cost and a target markup percentage, and it gives you the selling price. You can then paste that price here to confirm the margin it produces.
What is gross profit?
Gross profit is revenue minus the direct cost of the product or service. It does not include operating expenses like rent, salaries, or marketing. Net profit subtracts those too. This calculator shows gross profit only.
Why does a higher markup not always mean a higher margin?
Because margin and markup use different denominators. A 100% markup doubles the cost, giving a 50% margin. A 400% markup on the same cost gives an 80% margin. As markup grows, margin approaches 100% but never reaches it.
How accurate is the result?
The result is exact for the numbers you enter. The accuracy of your margin depends entirely on how accurately you have calculated your costs. Underestimating costs is the most common source of error.
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