A profit margin calculator is essential for entrepreneurs, product managers, and finance teams who need to price products correctly and measure profitability. Enter your cost and revenue to instantly see gross profit, margin percentage, and markup.
How to Use This Calculator
- Enter the cost of the product or service (what you paid or spent to produce it).
- Enter the revenue (the price you sell it for).
- Click Calculate to see gross profit, profit margin %, and markup %.
What This Calculator Measures
Understanding profit vs. markup is one of the most common sources of confusion in business pricing.
- Gross profit — Revenue minus cost: how much money you keep per sale.
- Profit margin % — Gross profit divided by revenue, expressed as a percentage.
- Markup % — Gross profit divided by cost, expressed as a percentage.
- Cost — Everything spent to produce or acquire the product or service.
Formula or Logic
Gross Profit = Revenue − Cost
Profit Margin % = (Gross Profit ÷ Revenue) × 100
Markup % = (Gross Profit ÷ Cost) × 100
The key distinction: margin is calculated against selling price, markup is against cost. A 50% markup does not equal a 50% margin.
Example Calculations
Example 1: You buy a product for $40 and sell it for $100. Gross profit = $60. Margin = 60%. Markup = 150%.
Example 2: A service costs $200 to deliver and sells for $350. Gross profit = $150. Margin = 42.9%. Markup = 75%.
Understanding Your Results
Retailers typically target 40–60% gross margins. SaaS companies often exceed 70%. Manufacturing businesses may operate on 20–30%. Compare your margin against industry benchmarks to assess competitiveness.
Common Mistakes to Avoid
- Confusing gross margin with net margin (which includes overhead, taxes, and fixed costs).
- Using markup % when presenting margin to investors — they are very different numbers.
- Forgetting to include indirect costs like shipping, packaging, or credit card fees in your cost figure.
- Setting prices based on cost alone without considering competitor pricing or perceived value.