Profit Margin Calculator
Calculate profit margin, markup, and profit from cost and selling price.
This tool is for informational and educational purposes only. It is not a substitute for professional financial, medical, legal, or engineering advice. See Terms of Service.
Can't find what you need?
Request a ToolHow to Use the Profit Margin Calculator
This calculator gives you instant insight into the profitability of any product or service. Follow these steps:
- Enter your cost. This is the total cost to produce or acquire one unit of your product. Include materials, labor, and any direct costs associated with creating the product. For a service business, enter the cost of delivering the service to one client.
- Enter your selling price. This is the price you charge (or plan to charge) customers. If you sell at different prices across channels, use your average or most common price.
Results update instantly as you type. The calculator shows your profit margin as a percentage, the dollar amount of profit per unit, the markup percentage, and the cost ratio. Profit margin tells you what percentage of revenue is profit. Markup tells you how much you added on top of cost. These two numbers are related but not the same, and confusing them is a common pricing mistake.
Use the Share button to send a pre-filled link to a business partner, or Copy to paste the result into a spreadsheet or report. All calculations run entirely in your browser. No data is stored or transmitted.
About Profit Margin
Profit margin measures how much of each dollar of revenue a business keeps as profit after covering costs. It is one of the most important metrics for evaluating business health. A product that sells for $60 and costs $40 has a profit margin of 33.3% and a markup of 50%. The margin is calculated as profit divided by revenue, while markup is profit divided by cost.
Healthy profit margins vary widely by industry. Grocery stores typically operate at 1-3% net margin, while software companies can achieve 60-80%. Understanding your margin helps you set prices, evaluate product lines, and compare your performance against industry benchmarks.
Frequently Asked Questions
What is a good profit margin?
A "good" profit margin depends on your industry. Retail businesses often see 3-5% net margins, restaurants 3-9%, and professional services 15-25%. Software and digital products can reach 60-80%. As a general rule, a net profit margin above 10% is considered healthy for most industries. Gross profit margins are typically much higher since they do not account for overhead, taxes, and other fixed costs.
What is the difference between margin and markup?
Margin and markup both measure profitability but use different bases. Margin is profit divided by selling price (revenue). Markup is profit divided by cost. A product that costs $40 and sells for $60 has a 33.3% margin but a 50% markup. Margin is always lower than markup for the same transaction. Business owners should be clear about which metric they are using when discussing pricing, since confusing the two can lead to underpricing.
How do you calculate profit margin?
Profit margin is calculated by subtracting cost from revenue to get profit, then dividing profit by revenue and multiplying by 100. The formula is: Margin = ((Revenue - Cost) / Revenue) x 100. For example, if you sell a product for $100 and it costs $70, your profit is $30, and your margin is ($30 / $100) x 100 = 30%.
What is the difference between gross and net profit margin?
Gross profit margin only accounts for the direct cost of goods sold (materials, direct labor). Net profit margin includes all expenses: overhead, rent, salaries, marketing, taxes, and interest. A business might have a 50% gross margin but only a 10% net margin after all other expenses. This calculator computes gross margin based on the cost and selling price you enter. To get net margin, your cost figure should include all allocated expenses per unit.