Profit Margin Calculator
Calculate margin, markup, and profit from cost and revenue — or work backwards from a target margin.
Cost & Selling Price → Profit Analysis
Gross Profit
Profit Margin
Markup
Margin = profit ÷ revenue | Markup = profit ÷ cost
Cost & Target Margin → Selling Price
Selling Price
Gross Profit
Margin vs. Markup — What’s the Difference?
Profit margin expresses profit as a percentage of the selling price. Markup expresses profit as a percentage of the cost. If an item costs $40 and sells for $65: profit = $25, margin = 25/65 = 38.5%, markup = 25/40 = 62.5%.
These two numbers are often confused. A 50% markup does not equal a 50% margin. To achieve a specific profit margin, use the formula: Selling Price = Cost ÷ (1 − Margin%). For a 40% margin on a $40 item: $40 ÷ 0.60 = $66.67.
Markup vs. Margin Comparison
| Cost | Markup % | Sell Price | Gross Margin |
|---|---|---|---|
| $50 | 25% | $62.50 | 20.0% |
| $50 | 50% | $75.00 | 33.3% |
| $50 | 100% | $100.00 | 50.0% |
| $50 | 150% | $125.00 | 60.0% |
Typical Gross Margins by Industry
| Industry | Typical Gross Margin |
|---|---|
| Software / SaaS | 70–90% |
| E-commerce / Retail | 40–60% |
| Restaurant / Food Service | 60–70%* |
| Manufacturing | 20–40% |
| Grocery / Supermarket | 20–30% |
*Food gross margin before labor and overhead. Net margins in restaurants are typically 3–9%.
Frequently Asked Questions
What’s a good profit margin?
It depends heavily on the industry. Software companies often achieve 70%+ gross margins. Restaurants typically run 3–9% net margins. As a general benchmark for small businesses: a 10% net margin is average, 20% is good, and above 20% is excellent.
What’s the difference between gross margin and net margin?
Gross margin subtracts only the direct cost of goods sold (COGS) from revenue. Net margin subtracts all expenses including operating costs, taxes, and interest. Gross margin measures production efficiency; net margin measures overall profitability. This calculator computes gross margin.
If I want a 30% margin, what markup should I use?
Use the formula: Markup = Margin ÷ (1 − Margin). For 30% margin: 0.30 ÷ 0.70 = 42.86% markup. In other words, adding 42.86% to your cost gives you a 30% profit margin on the selling price. Use the “Target Margin” tab above to calculate this automatically.
What should I include in “cost”?
For a simple product, cost = what you paid for it (COGS). For manufactured goods, include materials, direct labor, and direct overhead. For pricing purposes, you may want to factor in shipping, packaging, transaction fees, and a share of operating expenses to ensure you’re actually profitable at that margin.