Profit Margin Calculator
Calculate profit margin, markup, and pricing instantly
Last updated: January 2025
About This Tool
Profit margin is a key indicator of business health and efficiency. This calculator helps you understand how much profit you retain from each dollar of revenue, enabling better pricing decisions and financial planning.
What is Profit Margin Calculator?
Profit margin represents the percentage of revenue that remains as profit after accounting for costs. There are three main types: gross profit margin (revenue minus cost of goods sold), operating profit margin (after operating expenses), and net profit margin (after all expenses including taxes). Higher margins indicate better profitability.
How It Works
Profit margin is calculated by dividing profit by revenue and multiplying by 100 to get a percentage. For gross margin, subtract the cost of goods sold from revenue. For net margin, subtract all expenses. The result shows how many cents of profit you make from each dollar of sales.
Formula
Profit Margin = (Revenue - Cost) / Revenue × 100
Profit Margin
40.00%
of selling price
Markup
66.67%
of cost price
Revenue Breakdown
Margin vs Markup: What's the Difference?
Profit Margin
Percentage of selling price that is profit.
Margin = (Profit ÷ Revenue) × 100Markup
Percentage added to cost price to get selling price.
Markup = (Profit ÷ Cost) × 100Calculation Summary
Industry Benchmarks
💡 Pro Tips
- • A 50% markup ≠ 50% margin (it's ~33% margin)
- • Track both metrics for complete pricing insight
- • Consider all costs including overhead
Related Tools
When to Use This Calculator
- 1Setting prices for products or services
- 2Evaluating business profitability and efficiency
- 3Comparing performance against industry benchmarks
- 4Analyzing trends in profitability over time
- 5Making decisions about cost reduction or price changes
Pro Tips
- •Track margins over time to identify trends and issues early
- •Compare your margins to industry averages for context
- •Focus on both increasing revenue and reducing costs
- •Different products/services may have different target margins
- •Consider volume vs. margin trade-offs in pricing strategy
Common Mistakes to Avoid
- •Confusing markup with margin (they are calculated differently)
- •Not accounting for all costs when calculating true margins
- •Ignoring the impact of discounts on profit margins
- •Setting prices based only on competitor pricing, not costs
- •Not segmenting margin analysis by product or customer