Profit Margin Calculator
Calculate profit margin, markup and selling price for any product: retail, wholesale or distribution
The price you sell the product for
Total cost of goods sold
Profit margin is the percentage of revenue that remains as profit after deducting costs. It's a key metric for understanding business profitability. A higher profit margin means you're keeping more money from each sale, while a lower margin means costs are consuming more of your revenue.
How to Calculate Profit Margin
Profit Margin = ((Revenue - Costs) ÷ Revenue) × 100
Markup
The percentage added to cost to determine selling price.
Markup = (Profit ÷ Cost) × 100
Key Difference
Margin is based on selling price, while markup is based on cost. A 50% margin is not the same as a 50% markup!
Typical Margins by Industry:
- Grocery Retail:1-3%
- Clothing Retail:4-13%
- Software/SaaS:70-90%
- Restaurants:3-5%
With our platform, you can:
- ✓Automatically calculates margins for all products
- ✓Tracks costs including shipping and fees
- ✓Analyzes profitability trends over time
- ✓Optimizes pricing based on data
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See also
Updated on 9 October 2026
How to use the profit margin calculator
Margin and markup describe the same profit from two different angles. Mixing them up is one of the most common pricing errors in small businesses.
- Choose “Calculate Margin” when you already know the selling price and the cost.
- Enter the revenue (selling price) and the cost of the goods sold. The calculator returns the profit, the margin and the markup.
- Choose “Find Price” when you know the cost and the margin you want to reach.
- Enter the cost and the desired profit margin. The calculator returns the selling price that delivers it.
Worked example
A product costs 60 and sells for 100. The profit is 40.
Margin = 40 ÷ 100 = 40%. Markup = 40 ÷ 60 = 66.7%.
To reach a 25% margin on a cost of 60, the price is 60 ÷ (1 − 0.25) = 80. Multiplying the cost by 1.25 gives 75, which is a margin of only 20%.
Markup to margin conversion
| Markup on cost | Margin on price |
|---|---|
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 100% | 50% |
| 150% | 60% |
Wholesale, distributor and retail margins
Every business in the chain calculates its margin on its own selling price. A manufacturer sells to a distributor at 60. The distributor sells to a retailer at 75: a 20% margin, or a 25% markup. The retailer sells at 100: a 25% margin, or a 33.3% markup.
Margins along the chain do not add up. The product went from 60 to 100, a 40% margin overall, not 20% + 25% = 45%.
To work back from a shelf price to a wholesale price, multiply by (1 − retailer margin). A product that retails at 100 with a 25% retailer margin must reach the retailer at 75. Use “Find Price” for the other direction, from your cost up to your selling price.
Common mistakes
- Adding the target margin to the cost. To get a margin, divide the cost by (1 − margin).
- Leaving costs out. Count inbound freight, duties and packaging, not just the purchase price.
- Comparing a gross margin with a net margin. Gross margin deducts only the cost of the goods; net margin deducts every expense of the business.
- Calculating on prices that include VAT. Use prices net of recoverable tax on both sides.
Frequently asked questions
What is a good profit margin?
There is no universal figure. Margins depend on the industry, the sales volume and the service included. Compare a product with your own history and with direct competitors rather than with a generic benchmark.
Why is markup always higher than margin?
Both use the same profit, but markup divides it by the cost and margin divides it by the selling price. The cost is the smaller number, so the percentage is larger.
Is this gross margin or net margin?
Gross margin: selling price minus the cost of the goods. Rent, salaries, marketing and tax are not included.
How do discounts affect margin?
A discount comes straight out of the profit. On a 40% margin, a 10% discount removes a quarter of the profit, so volume must rise by a third to earn the same amount.