Finance Tools/Profit Margin Calculator
Profit Margin Calculator
Calculate profit margin and cost/selling price
Input
Result
Enter values
Frequently Asked Questions
Margin is calculated from the selling price (profit ÷ selling price), while markup is calculated from the cost (profit ÷ cost). A 50% markup doesn't equal 50% margin. Example: cost $60, selling price $100. Markup = ($40÷$60) = 66.7%, but margin = ($40÷$100) = 40%. The same profit has different percentages depending on the base used.
Healthy margins vary by industry. Grocery stores typically have 1-3% net margins, restaurants 3-9%, software companies 15-25%, and luxury goods 25-65%. Gross margin (before overhead) is usually much higher than net margin (after all expenses). Compare with industry benchmarks for meaningful analysis.
Margin to Markup: Markup = Margin ÷ (1 - Margin). Markup to Margin: Margin = Markup ÷ (1 + Markup). Examples: 25% margin = 33.3% markup; 50% markup = 33.3% margin; 100% markup = 50% margin. This relationship is why the same numbers mean different things in each context.
Gross margin only subtracts direct product costs (COGS—materials, direct labor). Net margin subtracts all expenses including operating costs, overhead, interest, and taxes. A company might have 40% gross margin but only 10% net margin after rent, salaries, marketing, and other expenses are deducted.
Increase margins by: raising prices strategically (if market allows), reducing direct costs through better suppliers or efficiency, improving product mix toward higher-margin items, reducing overhead costs, and increasing sales volume to spread fixed costs. A 2% improvement in margin can significantly impact overall profitability.