Profit Margin Calculator
Margin from your numbers, the equivalent markup, and the price that hits a target margin
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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
- Enter the inputs requested by the calculator.
- Choose the units or options that match your situation and review the assumptions.
- Run or update the calculation to see the result.
- Review the result, breakdown, and formulas shown on the page.
- 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.