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Profit Margin Calculator

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Margin is profit divided by the selling price; markup is profit divided by the cost. Something that costs 40 and sells for 65 makes 25 profit: a 38.5% margin but a 62.5% markup. To hit a target margin, price = cost ÷ (1 − margin), so a 35% margin on a 40 cost needs a price of 61.54.

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Results are estimates for general information, not financial advice. Check the figures with your lender, bank or a qualified adviser before deciding.

Formulas

Profit = price − cost Margin (%) = profit ÷ price × 100 Markup (%) = profit ÷ cost × 100 Price for margin = cost ÷ (1 − margin) Price for markup = cost × (1 + markup)

Margin versus markup

They describe the same profit from different starting points, and mixing them up is one of the most common pricing mistakes. If you want a 50% margin and add 50% to the cost, you only get a 33% margin.

MarkupMargin
25%20%
50%33.3%
100%50%
200%66.7%

Margin can never reach 100%, but markup can be any size.

What counts as cost?

For gross margin, use the direct cost of the product: what you paid the supplier, or materials and production. Shipping to you and payment fees are often included too. Rent, salaries, marketing and other overheads come out of gross profit later, giving net margin.

What's a good margin?

It varies hugely by industry. Supermarkets often run gross margins around 25–30% and net margins of a few percent. Software and digital products can exceed 80% gross. Restaurants commonly target food costs around 28–35% of menu price (a 65–72% gross margin on food). Compare yourself with businesses like yours, and make sure your gross margin covers overheads with room to spare.

Pricing with VAT or sales tax

Calculate margins on prices excluding tax, because the tax isn't your money. Use the VAT Calculator to remove tax from a gross price first.

Common pricing mistakes

  • Confusing markup with margin: adding 30% to cost gives a 23% margin, not 30%. Use the calculator to set the price from the margin you need.
  • Forgetting hidden costs: payment fees, packaging, shipping, returns and marketplace commissions all come out of your margin.
  • Discounting without checking: a 20% discount on a product with a 30% margin removes two-thirds of the profit on each sale.
  • Ignoring overheads: gross margin must also pay for rent, software and your time before there is any real profit.

Frequently asked questions

How do I calculate profit margin?

Subtract the cost from the selling price, divide by the selling price and multiply by 100.

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 the cost.

How do I price a product for a 40% margin?

Divide the cost by 0.6. A cost of 30 needs a price of 50.

Is a 50% markup a 50% margin?

No. A 50% markup gives a 33.3% margin. A 100% markup gives a 50% margin.

Should I include tax in margin calculations?

No. Use prices excluding VAT or sales tax.

Last updated October 2026 · More finance & business