Profit margin calculator
Calculate the profit margin and markup of a product, or the selling price you need for a target margin.
I know the
Profit margin
40,0 %
On price
Markup
66,7 %
On cost
Selling price
100,00
What the customer pays
Profit
40,00
Price less cost
From cost to selling price
- Cost60,00
- Profit40,00
- Selling price100,00
Selling price by margin
| Margin | Markup | Price | Profit |
|---|---|---|---|
| 10 % | 11,1 % | 66,67 | 6,67 |
| 20 % | 25,0 % | 75,00 | 15,00 |
| 25 % | 33,3 % | 80,00 | 20,00 |
| 30 % | 42,9 % | 85,71 | 25,71 |
| 40 % | 66,7 % | 100,00 | 40,00 |
| 50 % | 100,0 % | 120,00 | 60,00 |
| 60 % | 150,0 % | 150,00 | 90,00 |
Margin here is measured on one product: price less cost. Overheads, interest and taxes are not included.
What is profit margin?
Profit margin is the share of the selling price that you keep as profit once the cost is paid. A 40 % margin means that of every 100 you sell, 40 is profit. Because it is a percentage, you can compare products and companies of any size.
Profit margin formula
Profit margin = (Price − Cost) / Price
Markup = (Price − Cost) / Cost
Selling price = Cost / (1 − Margin)
Multiply by 100 to read margin and markup as percentages.
How to calculate margin: an example
A product costs 60 and sells for 100, so the profit is 40. The margin is 40 / 100 = 40 %. The markup is 40 / 60 = 66,7 %. Same profit, two different percentages.
Margin and markup: what is the difference?
Both start from the same profit. Margin compares it with the price and markup with the cost, so a markup is always the higher figure. A 50 % margin is a 100 % markup.
Markup = Margin / (1 − Margin)
Margin = Markup / (1 + Markup)
Gross, operating and net margin
Gross margin = Gross profit / Revenue
Operating margin = Operating profit / Revenue
Net margin = Net income / Revenue
Each one takes off more costs: first the direct cost of sales, then overheads, and finally interest and taxes.
How to set a price for a target margin
A common mistake is to add the margin to the cost. Adding 30 % to a cost of 60 gives a price of 78, which is only a 23,1 % margin. To reach a real 30 % margin, divide the cost by 0,7: the price is 85,71.