Profit Margin Calculator

Profit margin answers one question: of every dollar a customer hands you, how much do you keep? The formula divides your profit by the selling price. Sell something for $100 that cost you $60, and your $40 profit divided by the $100 price gives a 40% gross margin.

Profit = Price − Cost
Margin % = Profit ÷ Price × 100
Markup % = Profit ÷ Cost × 100
Price for target margin = Cost ÷ (1 − Margin)

The reverse mode is where most pricing mistakes get caught. If you want a 30% margin on a product that costs $70, the intuitive move is to add 30% to the cost, which gives $91. That price only earns you a 23% margin. The correct calculation divides the cost by 0.70, which gives $100, because margin is measured against the price you have not set yet. This tool does that division for you in the "Cost + Target margin" mode.

We also show the markup equivalent next to every result, because suppliers, distributors, and retail buyers often quote markup while accountants and investors talk margin. The same $40 profit on a $60 cost is a 40% margin and a 66.7% markup at the same time. Confusing the two in a negotiation costs real money, since a "50% markup" sounds close to a "50% margin" but leaves you with a third less profit. Our markup calculator works the same problem from the other direction.

The optional overhead field turns gross margin into net margin. Gross margin only counts what the product itself cost you. If rent, software, packaging, and ad spend add $15 to every sale, your 40% gross margin on that $100 sale is really a 25% net margin. Estimating overhead per sale is rough by nature (divide monthly overhead by monthly sales for a workable number), but even a rough net figure prevents the classic trap of a business that looks profitable per product and loses money per month. When you know your per-unit numbers, the next question is volume, and that is exactly what our break-even point calculator answers.