How to calculate profit margin
Quick answer: To calculate profit margin, choose what you know and enter the numbers.
- Choose what you know. Cost and price, cost and the margin you want, or price and margin.
- Enter the numbers. The results update as you type.
Margin vs markup
Margin is profit as a share of the selling price; markup is profit as a share of the cost. Buying at $60 and selling at $100 is a 40% margin but a 66.7% markup. Mixing them up is a common reason for underpricing.
The formulas
Margin = (price − cost) ÷ price. Markup = (price − cost) ÷ cost. Price for a target margin = cost ÷ (1 − margin).
Frequently asked questions
What is a good profit margin?
It depends on the industry: grocery stores run on 1–3% net, software companies on 20%+. Compare with businesses like yours.
Can margin be over 100%?
No, margin is always below 100%. Markup can be any size.