Profit Margin & Markup Calculator
Margin, markup and profit from cost and price — the two are not the same.
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Your details
Result
- Profit
- $200.00
- Profit margin
- 40.00%
- Markup
- 66.67%
- Cost as a share of price
- 60.00%
Profit as a share of the selling price
Profit as a share of the cost
Margin and markup are different numbers
Buy at 300, sell at 500. The markup is 66.7% (200 profit over 300 cost). The margin is 40% (200 profit over 500 price). Both describe the same transaction, and confusing them is one of the most common pricing errors in small business.
A 50% markup is a 33.3% margin. A 100% markup is a 50% margin. If a supplier quotes "margin" and you price for "markup", you will systematically undercharge.
Gross, operating and net margin
Gross margin is revenue minus the direct cost of goods, and it is what this calculator computes. Operating margin also subtracts overheads such as rent, salaries and marketing. Net margin subtracts everything remaining, including interest and tax.
A business can have a healthy 60% gross margin and still lose money if overheads consume it. When someone quotes "margin" without qualifying it, gross is usually meant — and it is the least demanding of the three.
Converting between margin and markup
To convert a target margin into the markup you must apply: markup = margin ÷ (1 − margin). A 40% target margin requires a 66.7% markup on cost. Going the other way, margin = markup ÷ (1 + markup).
Retail practice is to set a standard markup by category — often called a keystone when it doubles cost — and then check that the resulting margin covers overheads with something left over.
Formula & methodology
What this calculator assumes
- This is gross margin: it excludes overheads, interest and tax, so it is the least demanding of the three margin measures.
- Margin and markup describe the same transaction with different denominators; confusing them leads to systematic underpricing.
Sources
- Horngren, Datar & Rajan, Cost Accounting: A Managerial Emphasis, 16th edition, Pearson, 2018 — margin and markup.
Frequently asked questions
Which should I use for pricing?
Set prices with markup (it starts from cost, which you know), but report and compare using margin — that is what investors, retailers and accountants mean by profitability.
What is a good profit margin?
It varies enormously by industry. Grocery retail runs on 1–3% net margins by volume; software can exceed 30%. Compare against your own sector, never against a general benchmark.
Can margin exceed 100%?
No. Margin is profit as a share of price, so it approaches but cannot reach 100%. Markup has no upper limit.