Skip to content
MasterMath

Profit Margin Calculator

Margin and markup get confused constantly, and that confusion costs money. Here both are worked out at once, from the same cost and the same price.

Currency and number format for

Profit margin

—

Profit margin—
Markup on cost—
Profit per unit—
Multiplier—

How this was worked out

    The formula

    margin = profit ÷ price × 100 · markup = profit ÷ cost × 100

    What it means

    Both measure the same profit, but on different bases: margin divides it by what you charge and markup by what it costs you. A product costing 60 sold at 100 leaves 40 of profit, which is a 40 % margin and a 66.67 % markup. Markup always comes out higher.

    How to work it out by hand

    1. Subtract the cost from the price to get the profit
    2. Divide by the price and multiply by 100: that is the margin
    3. Divide by the cost and multiply by 100: that is the markup

    What is worth knowing

    The mistake that wrecks the books: applying the margin you want as though it were a markup. If you want a 40 % margin on a cost of 60 and multiply by 1.4, you get 84 and your real margin is 28.6 %, not 40. The correct price is 100. On products with thin margins, that difference eats the profit entirely.

    Frequently asked questions

    What is the difference between margin and markup?

    Margin is worked out on the selling price and markup on the cost. At a cost of 60 and a price of 100: 40 % margin, 66.67 % markup.

    How do you calculate profit margin?

    Subtract the cost from the price, divide by the price and multiply by 100.

    What margin is a good margin?

    It depends on the sector: groceries run at 2 % to 5 % net, hospitality around 60 % gross, and software can go past 80 %.