Margin Calculator
Calculate gross profit margin percentage, net profit, and cost markup percentage for products.
Margin Breakdown
Margin and markup are not the same number
This is the most expensive confusion in small-business pricing. Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost. An item costing $60 and selling for $100 carries a 40% margin and a 67% markup — the same $40, measured against different bases.
Applying a markup when you meant a margin quietly undercharges, and the error grows as the percentage rises. To achieve a 50% margin you need a 100% markup; for a 60% margin, a 150% markup. A business that sets prices at "cost plus 30%" believing it earns a 30% margin is actually earning about 23%, and on thin margins that difference is the whole profit.
Read margins in layers. Gross margin is revenue minus cost of goods sold and tells you whether the product works. Operating margin subtracts overheads and tells you whether the business works. Net margin subtracts everything including interest and tax. Typical levels vary enormously by industry — grocery retail runs on low single-digit net margins, software on very high ones — so margins are only meaningful compared with sector peers.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a percentage of total revenue, whereas markup is profit as a percentage of product cost.
What is the difference between margin and markup?
Margin is profit as a percentage of the selling price; markup is profit as a percentage of cost. An item costing $50 sold at $100 has a 50% margin but a 100% markup. Confusing the two systematically underprices goods, and it is one of the most common small-business pricing errors.
How do I calculate gross margin?
(Revenue - cost of goods sold) / revenue x 100. Gross margin covers only direct costs. Operating margin additionally subtracts overheads, and net margin subtracts everything including interest and tax - so a healthy gross margin can still sit above a negative net margin.
What is a good profit margin?
It is entirely industry-dependent. Grocery retail runs on net margins of 1-3%, software can exceed 30%, and restaurants typically sit at 3-9%. Comparing your margin to businesses in your own sector is informative; comparing across sectors is not.