Profit margin calculator

Margin vs markup — the confusion that costs money

Margin and markup describe the same profit from two different angles, and mixing them up is one of the most common pricing mistakes. Markup answers "how much do I add on top of cost?" and is measured against your cost. Margin answers "what share of the selling price is profit?" and is measured against your price. The same deal can be a 50% markup and only a 33% margin — so a supplier quoting "50%" and an accountant reporting "33%" may be describing the identical transaction.

The formulas

Profit is simply price minus cost. From there: margin % = profit ÷ price × 100, and markup % = profit ÷ cost × 100. Because the denominator differs, markup is always the larger number for the same profit. To price from a target margin, don't just add the percentage to cost — that gives a markup. Divide instead: price = cost ÷ (1 − margin). A product costing 60 sold at a 40% target margin should be priced at 60 ÷ 0.6 = 100, which the "solve for price" field above does for you.

Gross margin and pricing

The margin here is gross margin — price minus the direct cost of the goods. Your net margin is what's left after overheads, fees and tax, and it's always lower, so a healthy gross margin is what gives those fixed costs room to be covered. Use this to sanity-check the rates in your quotes and invoices before you send them — pricing that looks profitable on markup can be thin once you read it as margin.

For informational purposes only — not financial advice.