📊 Profit Margin Calculator
By ToolNimba Editorial Team · Reviewed by ToolNimba Editorial Review, business and personal finance content · Updated 2026-06-19
This calculator is for general estimation only and is not accounting or financial advice. It looks at a single sale and ignores taxes, shipping, payment fees, returns, overheads, and other costs that affect real profit. Confirm your numbers with your own bookkeeping and speak to a qualified accountant before making pricing or business decisions.
This profit margin calculator turns a cost and a selling price into the three numbers that actually matter: your profit per sale, your gross margin as a percentage, and your markup as a percentage. Enter what an item cost you and what you sell it for, and you will see all three at once, which makes it easy to check a price or compare products without juggling formulas.
What is the Profit Margin Calculator?
Profit is the simplest figure: it is the selling price (revenue) minus the cost. If something costs you $80 and you sell it for $100, your profit is $20. That $20 is the same number whether you express it as a margin or a markup; what changes is the base you compare it against.
Gross margin expresses profit as a share of the selling price: margin = profit ÷ revenue × 100. On the example above that is 20 ÷ 100 = 20%. Margin can never reach 100%, because profit is always smaller than the price it is part of. Markup expresses the same profit as a share of the cost instead: markup = profit ÷ cost × 100, which here is 20 ÷ 80 = 25%. Markup has no upper limit, so a 25% markup and a 20% margin can describe the very same sale.
The two are easy to confuse, and the confusion costs money. A common mistake is to add a 40% markup believing it gives a 40% margin; in reality a 40% markup is only about a 28.6% margin. If you price by margin, work back from the selling price; if you price by markup, build up from the cost. Knowing which one a supplier, marketplace, or spreadsheet is quoting keeps your pricing honest and your profit where you expect it.
When to use it
- Checking whether a planned selling price gives you an acceptable gross margin before you list a product.
- Translating a supplier or marketplace markup into the margin it actually delivers.
- Comparing the profitability of two products that have different costs and prices.
- Working backwards from a target margin to set a selling price that hits it.
How to use the Profit Margin Calculator
- Enter the cost: what you paid to buy or make one unit.
- Enter the revenue: the price you sell that unit for.
- Read off the profit per unit, the gross margin %, and the markup %.
- Adjust either figure to test a new price or cost and see the percentages update instantly.
Formula & method
Worked examples
An item costs $80 and sells for $100.
- profit = 100 − 80 = $20.00
- margin = 20 ÷ 100 × 100 = 20%
- markup = 20 ÷ 80 × 100 = 25%
Result: Profit $20.00, 20% gross margin, 25% markup
A service costs $60 to deliver and is billed at $150.
- profit = 150 − 60 = $90.00
- margin = 90 ÷ 150 × 100 = 60%
- markup = 90 ÷ 60 × 100 = 150%
Result: Profit $90.00, 60% gross margin, 150% markup
Stock that cost $40 is cleared at $36 (a loss).
- profit = 36 − 40 = −$4.00
- margin = −4 ÷ 36 × 100 ≈ −11.11%
- markup = −4 ÷ 40 × 100 = −10%
Result: Loss of $4.00, about −11.11% margin, −10% markup
How a given markup translates into a gross margin
| Markup | Equivalent margin |
|---|---|
| 10% | 9.09% |
| 25% | 20% |
| 40% | 28.57% |
| 50% | 33.33% |
| 100% | 50% |
| 200% | 66.67% |
Rough gross margin ranges by sector (general guidance, not targets)
| Sector | Typical gross margin |
|---|---|
| Grocery and supermarkets | 15% to 30% |
| Restaurants (food) | 60% to 70% |
| Clothing and apparel retail | 40% to 60% |
| Software and SaaS | 70% to 90% |
| Consulting and services | 50% to 80% |
Common mistakes to avoid
- Confusing markup with margin. A 40% markup is not a 40% margin. Markup compares profit to cost, while margin compares profit to the selling price. The same $20 profit on an $80 cost is a 25% markup but only a 20% margin.
- Dividing by the wrong number. For margin you divide profit by revenue; for markup you divide profit by cost. Swapping the denominator gives the wrong percentage and can quietly underprice your product.
- Treating gross margin as net profit. This tool shows gross margin, which only accounts for the direct cost of the item. Rent, wages, marketing, shipping, fees, and tax still come out of that margin, so your net profit is lower.
- Expecting a margin above 100%. Gross margin can approach but never reach 100%, because profit is always part of the price. If a figure tops 100% you are almost certainly looking at markup, not margin.
Glossary
- Cost
- What it costs you to buy or produce one unit, also called the cost of goods sold (COGS) for that item.
- Revenue
- The selling price you receive for one unit before any costs are deducted.
- Profit
- Revenue minus cost. The amount you keep from a single sale before overheads and tax.
- Gross margin
- Profit expressed as a percentage of revenue (profit ÷ revenue × 100). Always below 100%.
- Markup
- Profit expressed as a percentage of cost (profit ÷ cost × 100). Has no upper limit.
Frequently asked questions
What is the difference between margin and markup?
Margin and markup describe the same profit against different bases. Margin is profit divided by the selling price, while markup is profit divided by the cost. A $20 profit on an $80 item is a 20% margin but a 25% markup.
How do I calculate gross profit margin?
Subtract the cost from the revenue to get profit, then divide that profit by the revenue and multiply by 100. For example, a $100 sale on a $80 cost gives ($100 − $80) ÷ $100 × 100 = 20%.
Can profit margin be more than 100%?
No. Gross margin is profit as a share of the selling price, and profit is always smaller than the price, so margin gets close to but never reaches 100%. A figure above 100% is markup, which has no limit.
Is a higher margin always better?
A higher margin per sale is good, but it is only part of the picture. A lower margin can still earn more overall if it drives much higher volume, and gross margin ignores overheads, so always check net profit too.
How do I convert markup to margin?
Divide the markup by (100 plus the markup), then multiply by 100. A 25% markup becomes 25 ÷ 125 × 100 = 20% margin. The reference table on this page lists common conversions.
Does this calculator include tax and other costs?
No. It shows gross figures from a single cost and selling price only. It does not deduct sales tax, shipping, payment fees, returns, or business overheads, so your real net margin will be lower.
Sources
- Gross Margin , Investopedia
- Markup , Corporate Finance Institute