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Profit Margin Calculator

Compute margin and markup — or the price a target margin requires.

How the calculator works

Profit is revenue minus cost. Margin divides that profit by revenue — the share of every sales dollar that remains — while markup divides it by cost — the multiplier applied on top of what you paid. The two are not interchangeable: a 40% margin equals a 66.7% markup, and quoting one when you mean the other is a classic pricing error that can silently halve profitability. The price mode inverts the margin formula: selling price = cost ÷ (1 − target margin), so a $60 product at a 40% target margin must sell for $100. All three figures appear together so the relationship stays visible.

Formula

Margin = (Revenue − Cost) ÷ Revenue × 100
Markup = (Revenue − Cost) ÷ Cost × 100
Price for margin = Cost ÷ (1 − margin)

Where:

  • Cost — what one unit costs you (goods, materials, direct labor)
  • Revenue — the selling price of one unit
  • margin — target margin as a decimal (40% = 0.40)

Example

A product costs $60 and sells for $100: profit is $40 per unit, margin is 40 ÷ 100 = 40%, and markup is 40 ÷ 60 ≈ 66.7% — the same deal described two ways. Working backwards, a $60 cost with a 50% target margin demands a price of 60 ÷ 0.50 = $120; settling for $90 would deliver only a 33.3% margin. A competitor selling at $85 operates on a 29.4% margin — viable or not depending entirely on their cost structure.

Frequently Asked Questions

What is the difference between margin and markup?
Margin is profit as a share of the selling price; markup is profit as a share of cost. A 25% markup on a $100 cost yields $125 and a 20% margin — the numbers always differ because the denominators differ. Mixing them up makes prices lower than intended.
What is a good profit margin?
It depends on the industry: grocery retail often runs on low single digits, software and services can exceed 70%, and restaurants typically sit between 3% and 15%. Compare against your sector's norms and your own fixed costs rather than a universal benchmark.
Does this include overhead and taxes?
No — this is gross margin, based on direct cost per unit. Rent, salaries, marketing, and taxes come out afterward; a healthy gross margin must be large enough to absorb them and still leave net profit.
Why can't the target margin reach 100%?
A 100% margin would mean the entire selling price is profit and the product is free to produce — mathematically the price formula divides by zero. Margins approach but never reach 100% in practice; above 99.9% the calculator declines the input.

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