The profit margin calculator works out the profit, profit margin, and markup on a sale from the cost and the selling price. Enter what an item costs you and what you sell it for, and the calculator shows how much money you keep on the sale and what share of the selling price that profit is. Profit margin and markup sound alike, but they are measured differently, and this page shows both so you can compare prices, set targets, and check a quote without mixing them up.
Profit Margin and Markup: What Is the Difference?
Profit is the same in both measures: the selling price minus the cost. The difference is what the profit is compared with. Profit margin divides the profit by the selling price, so it answers the question: of every unit of currency a customer pays, how much is profit? Markup divides the profit by the cost, so it answers: by what percentage did I raise the price above cost? Because the selling price is larger than the cost whenever there is a profit, markup is always higher than margin on the same sale, and the two can never be equal except at zero profit.
For example, an item that costs 60 and sells for 100 gives a profit of 40. The margin is 40 divided by 100, which is 40%. The markup is 40 divided by 60, which is 66.67%. Both numbers describe the same sale. A seller who wants a margin of 40% must therefore set a price that is 66.67% above cost, not 40% above cost. That is the most common pricing mistake this calculator helps you avoid: adding 40% to cost gives a price of 84, and the margin on 84 is only 28.57%, because 24 of profit divided by 84 is 28.57%.
How to Use the Calculator
- Enter the cost: what you paid for the item, including any cost you want counted in the sale, such as delivery or packaging, if that is how you price it.
- Enter the selling price: what the customer pays, before any separate tax is added, so the comparison stays consistent.
- Press Calculate and read the profit, the profit margin, and the markup.
- Change either figure to test a different price and watch the margin move, so you can settle on a price that meets your target.
Worked Example
A jeweller buys a piece for 60 and sells it for 100. The profit is 100 minus 60, which is 40. The profit margin is 40 divided by 100, or 40%. The markup is 40 divided by 60, or 66.67%. If the jeweller instead wants a margin of 50%, the price must be twice the cost: 120, because a profit of 60 on a price of 120 is 50%. And if a competitor sells the same piece for 90, the profit is 30, the margin is 33.33%, and the markup is 50%. Use the calculator to run the same comparison on your own figures before you change a price.
Setting a Price from a Target Margin
To reach a chosen margin, you cannot simply add that percentage to the cost. The price that gives a margin of M percent is the cost divided by one minus M as a decimal. So for a 40% margin on a cost of 60, the price is 60 divided by 0.60, which is 100. For a 25% margin on a cost of 80, the price is 80 divided by 0.75, which is 106.67. Enter the price you are considering in this calculator and check the margin it returns; adjust it until the margin matches your target. Remember to count every cost that belongs in the sale, including fees, packaging, and delivery, because leaving a cost out makes the margin look better than it really is.
Who Uses This Calculator
Shop owners and online sellers use it to price stock and to check that a discount still leaves a healthy margin. Jewellers and gold sellers use it alongside the gold calculators on this site to see what a making charge or a resale price means in margin terms. Freelancers use it to check what share of a fee is profit after their own costs. And anyone comparing two prices for the same item can use it to see which deal is really better, once cost and price are both known.
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Frequently Asked Questions
How do I calculate profit margin?
Subtract the cost from the selling price to get the profit, then divide the profit by the selling price and multiply by 100. A cost of 60 and a price of 100 gives a profit of 40 and a margin of 40%.
What is the difference between margin and markup?
Margin divides profit by the selling price; markup divides profit by the cost. On the same sale markup is always higher than margin, because the cost is smaller than the price. A 40% margin on a cost of 60 needs a markup of 66.67%.
Can the margin be over 100%?
No. Margin is profit as a share of the selling price, and profit can never exceed the price when the cost is zero or positive. Markup, by contrast, has no upper limit.
What if the selling price is lower than the cost?
Then the profit is negative, which is a loss, and the margin and markup are both negative. The calculator shows the negative figures so you can see the size of the loss.
Should VAT or sales tax be included in the price?
Keep the comparison consistent: use the price and cost on the same tax basis. If the cost includes tax and the price does not, or the other way round, the margin will be wrong.
What margin should I aim for?
There is no single right margin. It depends on your costs, your market, and how much volume you sell. Use this calculator to test prices and to make sure a discount or a fee does not wipe out the margin you need.
Does this calculator store my figures?
No. The calculation runs in your browser and your cost and price are not sent anywhere or stored.