About this Profit Margin Calculator
Profit margin is one of the most important metrics for any business. It tells you what percentage of sales has turned into profit. Unlike markup, which adds to the cost price, margin shows profit relative to the selling price.
Who this calculator is for
- Founders, operators, and finance teams monitoring unit profitability.
- Merchants comparing how much of each sale is kept after direct costs.
- Anyone trying to separate margin thinking from markup thinking.
When to use it
- Translate cost and selling price into gross profit, margin, and markup together.
- Check whether current pricing leaves enough room for overhead and ad spend.
- Compare how a price change or cost increase affects profitability.
How to use this calculator
- Enter the Cost of the item (what you paid to produce or buy it).
- Enter the Revenue (the final selling price).
- The calculator instantly determines your Gross Profit and Margin %.
Key assumptions
- This calculator looks at gross profit only and does not include overhead, taxes, or financing costs.
- Revenue must be positive for margin to be defined.
- Inputs are assumed to represent one item, one sale, or one average unit scenario.
- Markup is defined as profit divided by cost, so it is undefined when cost is zero.
Accuracy and testing
Review formula sources, default test cases, assumptions, unit handling, rounding rules, and changelog for this calculator.
How this calculator works
The formula for Gross Profit Margin is:
Margin % = ((Revenue - Cost) / Revenue) * 100
For example, if you sell a shirt for $50 that cost you $25, your margin is ($25 / $50) = 0.5 or 50%.
Inputs explained
Cost (COGS)
Cost of Goods Sold. The direct costs attributable to the production of the goods sold in a company. Includes material and labor.
Revenue
The total amount of income generated by the sale of goods or services related to the company's primary operations.
Understanding your results
A higher Margin % means you keep more of every dollar you earn. If your margin is low, you may need to reduce costs or increase prices. Gross Profit is the actual dollar amount earned per unit.
Example scenarios
Retail Product
Cost $20, Sell for $50. Gross Profit $30. Margin 60%.
Low Margin High Volume
Cost $90, Sell for $100. Gross Profit $10. Margin 10%.
Key Features
- Instant Margin Calculation
- Gross Profit Display
- Markup Comparison
Tips & Best Practices
- Do not confuse Margin with Markup. A 50% Markup results in a 33% Margin.
- Track your margin over time to ensure rising material costs aren't eating into your profits.
- Compare your margin against industry averages to see if you are competitive.
Glossary of Terms
- Gross Margin
- Total sales revenue minus its cost of goods sold (COGS), divided by total sales revenue, expressed as a percentage.
- Markup
- The amount added to the cost price of goods to cover overhead and profit.
- Net Margin
- The percentage of revenue remaining after ALL expenses (operating costs, interest, taxes) have been deducted.