Profit Margin Calculator
Margin is where marketing spend either works or doesn't — it sets how much you can afford to pay for a customer. Enter your cost and price for instant margin, markup and profit, or reverse it to find the price a target margin demands.
Margin and markup are not the same number
This trips up more businesses than almost any other pricing mistake. Markup measures profit against your cost; margin measures it against your price. A 50% markup on a $50 cost gives a $75 price — but that's only a 33% margin, not 50%. If you set prices by "adding 50%" while quoting margins to your accountant, you'll consistently earn less than you think. Decide which one you're working in and stay there. For deciding what you can afford to spend on marketing, margin is the number that counts, because it's the slice of each sale that's actually yours.
Cost-plus is a floor, not a strategy
Adding a fixed percentage to cost guarantees you won't sell at a loss, but it leaves money on the table whenever customers would happily pay more — and prices you out whenever they wouldn't. The cost-plus price is your floor; the ceiling is set by the value the customer perceives and what competitors charge. The widest margins come from products people buy on outcome, not on a per-unit cost comparison, so invest in the positioning and proof that justify a higher price rather than racing rivals to the bottom of a markup table.
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Frequently asked questions
How do you calculate profit margin?
Gross profit margin = (selling price − cost) ÷ selling price × 100. If an item costs $40 and sells for $100, the margin is (100 − 40) ÷ 100 = 60%. Margin is always expressed as a share of the price, not the cost.
What is the difference between margin and markup?
Markup is profit as a percentage of cost; margin is profit as a percentage of price. The same $40-cost, $100-price item has a 150% markup but a 60% margin. Confusing the two leads to systematic underpricing.
What price do I need for a target margin?
Price = cost ÷ (1 − target margin as a decimal). For a 60% margin on a $40 cost, price = 40 ÷ (1 − 0.6) = $100. Note you divide by one minus the margin — you cannot just add the margin percentage to the cost.