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Profit Margin and Markup Calculator

The two numbers people mix up, side by side.

Inputs
Profit margin
60%
LossThinTypical retailHealthySoftware-like
Markup on cost
150%
Profit per unit
60.00
Cost as a share of price
40%
margin = (price − cost) ÷ price · markup = (price − cost) ÷ cost

A 150% markup is a 60% margin. Markup is measured against cost, margin against price, so markup is always the larger number.

Every tool runs entirely in your browser. Your files are never uploaded to a server.

Margin is profit as a share of the selling price; markup is profit as a share of the cost. On a product costing 40 and selling for 100, the margin is 60% and the markup is 150% — the same profit, two denominators.

How to use Margin Calculator

  1. Enter your cost. What the unit costs you, landed, before you sell it.
  2. Enter your selling price. What the customer pays, excluding sales tax.
  3. Read both figures. Margin, markup and profit per unit are shown together.

About calculating profit margin

Margin and markup describe the same profit and disagree on how to express it, which is why they are the most commonly confused pair in small-business finance. Markup asks how much you added to your cost; margin asks how much of the customer's money you kept. Because cost is always the smaller of the two denominators, the markup percentage is always higher, and quoting it as though it were margin makes a business look considerably healthier than it is. The practical consequence shows up in pricing. If you want a 40% margin and set your price by adding 40% to cost, you will land at roughly 28.6% and be short on every unit you sell — a gap that compounds quietly across a whole catalogue. The correct move is to divide by one minus the target margin rather than multiply by one plus it. It is also worth being clear about which cost you are using. Gross margin uses only the direct cost of the goods and tells you whether the product works. Net margin adds rent, salaries, software and marketing, and tells you whether the business works. A product line can carry a healthy gross margin and still lose money once the overheads it consumes are counted against it, so a pricing decision made on gross margin alone is only half the picture.

Frequently asked questions

What is the difference between margin and markup?
Both measure the same profit against different bases. Margin divides it by the selling price, markup by the cost. Because cost is the smaller number, markup is always the larger percentage — which is why the two get confused in a flattering direction.
Can margin be more than 100%?
No. Margin is profit divided by price, and profit can never exceed price while cost is above zero, so margin approaches 100% without reaching it. Markup has no ceiling — a product costing 1 and selling for 100 carries a 9,900% markup and a 99% margin.
What is a good profit margin?
It depends entirely on the sector. Grocery retail runs on low single digits and survives on volume, general retail sits around 30 to 50%, and software can exceed 80% because the marginal cost of a copy is near zero. Compare against your own industry rather than an absolute number.
Should I include overheads in the cost?
For gross margin, no — use only the direct cost of the goods. Adding rent, salaries and marketing gives net margin, which is the figure that tells you whether the business as a whole makes money. Both are useful; mixing them is not.
How do I set a price for a target margin?
Divide cost by one minus the margin you want. For a 40% margin on a cost of 60, that is 60 ÷ 0.6 = 100. Adding 40% to the cost instead gives 84, which is a 28.6% margin — the classic pricing mistake.

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