Profit Margin Calculator
Profit Margin Calculator
Profit margin measures how much of each sale is actual profit, expressed as a percentage of the selling price (not the cost — a common point of confusion with markup, which is measured against cost instead). A 40% margin means 40 cents of every dollar in revenue is profit.
Business owners and pricing managers use margin to compare profitability across products regardless of price point, and to set pricing that meets a target profitability threshold before committing to a selling price.
- Margin vs. Markup: Margin is profit ÷ selling price; markup is profit ÷ cost. The same dollar profit gives a lower margin % than markup % — they are not interchangeable.
- Formula: Margin % = (Price − Cost) ÷ Price × 100.
- Higher Isn't Always Better: Extremely high margins on low-volume items may earn less total profit than modest margins on high-volume ones — margin is one input to pricing strategy, not the whole picture.
What's a good profit margin?
It varies hugely by industry — grocery retail often runs 1-3% margins while software can run 70%+. Compare against your specific industry benchmark rather than a universal target.
Why is my margin lower than my markup?
Margin is calculated against the (higher) selling price, while markup is calculated against the (lower) cost — the same profit dollar amount always produces a smaller margin percentage than markup percentage.
Profit Margin Calculator
Profit margin measures how much of each sale is actual profit, expressed as a percentage of the selling price (not the cost — a common point of confusion with markup, which is measured against cost instead). A 40% margin means 40 cents of every dollar in revenue is profit.
Business owners and pricing managers use margin to compare profitability across products regardless of price point, and to set pricing that meets a target profitability threshold before committing to a selling price.
- Margin vs. Markup: Margin is profit ÷ selling price; markup is profit ÷ cost. The same dollar profit gives a lower margin % than markup % — they are not interchangeable.
- Formula: Margin % = (Price − Cost) ÷ Price × 100.
- Higher Isn't Always Better: Extremely high margins on low-volume items may earn less total profit than modest margins on high-volume ones — margin is one input to pricing strategy, not the whole picture.
What's a good profit margin?
It varies hugely by industry — grocery retail often runs 1-3% margins while software can run 70%+. Compare against your specific industry benchmark rather than a universal target.
Why is my margin lower than my markup?
Margin is calculated against the (higher) selling price, while markup is calculated against the (lower) cost — the same profit dollar amount always produces a smaller margin percentage than markup percentage.