Profit Margin Calculator

Calculate gross margin, net profit margin, selling price targets, and overall business profitability.

Profit Margin Calculator

Calculate profit margin from revenue and cost. The result shows profit as a percentage of the selling price, which is the standard way to express how much of each sale you actually keep.

Profit margin formula

  • Profit: profit = revenue - cost
  • Profit margin: margin = profit / revenue x 100

Here revenue is the total selling price and cost is everything you spent to deliver the sale. For a single product, cost usually means the item's landed cost plus any per-order fees; for a whole business, it means all expenses in the period.

Margin is often confused with markup, but they divide by different numbers:

  • Margin divides profit by revenue: margin = profit / revenue.
  • Markup divides profit by cost: markup = profit / cost.

Because cost is smaller than revenue on a profitable sale, the markup percentage is always higher than the margin percentage for the same sale.

Worked example

Suppose you sell a product for 90 and your total cost per sale is 54.

  • Profit: 90 - 54 = 36
  • Margin: 36 / 90 = 0.40, or 40%
  • Markup on the same sale: 36 / 54 = 0.667, or about 66.7%

The same 36 of profit is a 40% margin but a 66.7% markup. If a supplier or blog post quotes a "50% markup" and you record it as a 50% margin, your forecasts will overstate profit.

When to use this calculator

  • Pricing a new product. Enter your cost and a proposed price to see whether the margin clears your target before you list the item.
  • Checking marketplace listings. Add platform fees, payment processing, and shipping into cost to see the true margin on each sale, not just the item-level margin.
  • Reviewing a discount. Recalculate margin at the promotional price to confirm the sale still earns enough to be worth running.
  • Comparing product lines. Margin puts products with very different price points on the same scale, so you can see which items genuinely contribute the most per unit of revenue.

Common mistakes

  • Confusing margin with markup, then wondering why realized profit is lower than planned.
  • Leaving variable costs out of the cost figure, such as marketplace fees, payment fees, packaging, and shipping.
  • Comparing gross margin from one source with net margin from another; they include different costs and are not interchangeable.
  • Treating a healthy percentage as proof of a healthy business. A 60% margin on very low sales volume can still fail to cover fixed costs.
  • Forgetting that refunds and returns reduce revenue after the fact, so realized margin is often a little lower than listed margin.

Related calculators

Use the break-even calculator to see how many sales your margin must cover fixed costs, and the net profit calculator for the bottom line after all expenses. The marketplace profit calculator folds platform fees into per-sale profit, while the average order value calculator and the conversion rate calculator help translate margin into overall store performance.

Frequently asked questions

How is profit margin calculated?
Profit margin is profit divided by revenue, expressed as a percentage: margin = (revenue - cost) / revenue x 100. For example, selling at 90 with a total cost of 54 gives a profit of 36 and a margin of 40%. It measures how much of each unit of revenue you keep as profit.
What is the difference between margin and markup?
Margin divides profit by revenue, while markup divides the same profit by cost. Because cost is smaller than revenue on a profitable sale, markup is always the larger number; a 50% markup equals only a 33.3% margin. Mixing the two up leads to prices that earn less than planned.
What is the difference between gross margin and net margin?
Gross margin subtracts only the direct cost of goods sold from revenue, while net margin subtracts every expense, including overheads like rent, fees, and advertising. Net margin is always lower and reflects the profitability of the whole business rather than the products alone.
What counts as a good profit margin?
It varies widely by industry, volume, and cost structure, so there is no universal benchmark. Low-margin, high-volume businesses can be healthier than high-margin ones with few sales. The most useful comparisons are against your own past margins and typical figures for your specific product category.
Should I include marketplace fees when calculating margin?
Yes. Platform commission, payment processing, shipping, and packaging are all real costs of making the sale, so leaving them out overstates your margin. Including every per-sale cost shows the margin you actually keep on each order.
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