How to use Profit Margin Calculator
This profit margin and markup calculator turns cost and price into the numbers retailers and freelancers actually need: profit, profit margin and markup. Enter a cost and selling price to see all three at once, or work backwards from a target margin to find the price you must charge. Because margin and markup are easy to confuse, a built-in comparison shows how the same dollar of profit produces very different percentages depending on which one you quote.
- Choose whether to start from a known price or a target margin.
- Enter your unit cost.
- Enter the selling price, or enter the margin you want to hit.
- Read the profit, profit margin and markup percentages.
- Use the comparison table to see margin versus markup at the same cost.
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Margin versus markup: the key difference
Profit margin expresses profit as a percentage of the selling price, while markup expresses the same profit as a percentage of the cost. Because price is larger than cost, markup is always the higher number for a given profit. For example, $40 of profit on a $100 price is a 40% margin but a 66.7% markup. Confusing the two leads to underpricing, so always be clear about which measure a supplier or client is quoting.
| Margin | Markup | Price (on $60 cost) |
|---|---|---|
| 20% | 25% | $75.00 |
| 40% | 66.7% | $100.00 |
| 50% | 100% | $120.00 |
Pricing from a target margin
To hit a desired margin you cannot simply add that percentage to cost — that gives you a markup instead. The correct formula is price = cost ÷ (1 − margin). A 40% margin on a $60 cost needs a $100 price, because $40 profit is 40% of $100. This calculator does the algebra for you, so you can set the margin your business needs and read off the exact price to charge without accidentally leaving money on the table.
Worked examples
From price
Inputs: cost $60 · price $100
Result: $40 profit · 40% margin · 66.7% markup
From margin
Inputs: cost $60 · target 40%
Result: Price $100 required
Glossary
- Profit margin
- Profit as a percentage of the selling price.
- Markup
- Profit as a percentage of the cost.
- Gross profit
- Revenue minus the cost of goods sold.
- Cost of goods sold
- The direct cost of producing or buying the items you sell.
- Break-even price
- The price at which revenue exactly covers cost, giving zero profit.
Related reading
Frequently Asked Questions
Why use Profit Margin Calculator?
- Solves in both directions — margin from cost and price, or required price from a target margin
- Clearly separates margin from markup, two figures that produce very different percentages
- Gross profit shown in absolute dollars alongside the percentage for unambiguous pricing
- Side-by-side table keeps equivalent markup and margin for the same cost visible at once
Common use cases
- Set the price of a new product line to reliably achieve a 40% gross margin per unit
- Verify that a supplier's quoted markup translates to an acceptable margin in your business
- Find the minimum price that still hits a target margin after applying a promotional discount
- Understand why a 50% markup and a 50% margin on the same cost produce different profits
- Calculate the margin on a service contract after subtracting hourly time and tooling costs
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