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Profit Margin Calculator

Margin from your numbers, the equivalent markup, and the price that hits a target margin

Margin

Quick summary

Profit margin is profit divided by revenue: sell for $100 what cost $60 and your margin is 40% (while your markup is 66.7% — same sale, different denominator). To price for a target margin, divide cost by (1 − margin): a 40% margin on a $60 cost needs a $100 price, not the $84 that multiplying by 1.4 gives. That divide-not-multiply distinction is the most common pricing error in small business.

Reviewed by Simple Calculators TeamLast reviewed

How to use this calculator

  1. Enter the inputs requested by the calculator.
  2. Choose the units or options that match your situation and review the assumptions.
  3. Run or update the calculation to see the result.
  4. Review the result, breakdown, and formulas shown on the page.
  5. Check the inputs, units, dates, and limitations before saving or sharing the result.

Frequently asked questions

How do I calculate profit margin?

(Revenue − Cost) ÷ Revenue × 100. A $100 sale with $60 of cost has a $40 profit and a 40% margin. Gross margin uses cost of goods only; net margin subtracts all operating expenses too — be clear which one a benchmark refers to.

What's the difference between margin and markup?

Same profit, different denominator: margin divides by the selling price, markup divides by cost. A 40% margin equals a 66.7% markup. Mixing them up systematically underprices — applying a '40% markup' when you need a 40% margin leaves you 12 points short.

How do I price for a target margin?

Divide cost by (1 − target margin). For a 45% margin on an $11 cost: $11 ÷ 0.55 = $20. Multiplying cost by (1 + margin) is wrong and always produces a lower margin than intended.

What's a good profit margin?

Wildly industry-dependent: grocery runs 1–3% net, restaurants 3–9%, retail 2–6%, software 70–80%+ gross. Compare against your own industry's benchmarks rather than a universal number, and track your trend — a falling margin flags cost creep or discounting before profits collapse.

Key terms

Gross Margin
Revenue minus cost of goods sold, ÷ revenue — profitability of the product itself.
Net Margin
Profit after ALL expenses ÷ revenue — profitability of the whole business.
Markup
Profit ÷ cost — the retailer's convention; always larger than the equivalent margin.

Methodology, sources & limitations

This page shows the formula, assumptions, and limitations used for this estimate. Rates, thresholds, and other time-sensitive inputs can change, so verify them against the relevant official source before relying on a result.

For our review approach and the primary sources we consult, see the methodology and source policy. If you spot an outdated figure or formula, please contact us with a correction.