Profit Margin Calculator
Calculate gross profit margin, operating margin, markup percentage, and selling price from cost and revenue — or work in reverse to find the price you need to hit a target margin. Used by business owners, retailers, and freelancers to price products and services correctly.
Total cost to produce or purchase
Price you charge the customer
The gross margin % you want to achieve
Margin and markup are often confused. This converter shows both and explains the difference.
Results
Margin vs. Markup: What's the Difference?
This is one of the most common points of confusion in business pricing. Both express profitability as a percentage, but they use a different base number:
- Margin = Profit ÷ Revenue × 100 — expressed as a percentage of the selling price
- Markup = Profit ÷ Cost × 100 — expressed as a percentage of the cost
For a product that costs $50 and sells for $80:
- Gross profit = $30
- Margin = $30 ÷ $80 = 37.5%
- Markup = $30 ÷ $50 = 60%
Neither is wrong — they just answer different questions. Margin answers "what percent of my revenue is profit?" Markup answers "by what percent did I increase the cost?"
Gross vs. Operating vs. Net Margin
| Metric | Formula | What It Measures |
|---|---|---|
| Gross Margin | (Revenue − COGS) ÷ Revenue | Core production profitability |
| Operating Margin | (Revenue − COGS − OpEx) ÷ Revenue | Business efficiency before financing & taxes |
| Net Margin | Net Income ÷ Revenue | True bottom-line profitability |
Typical Profit Margins by Industry
| Industry | Gross Margin | Net Margin |
|---|---|---|
| Software / SaaS | 60–80% | 10–25% |
| Retail | 20–50% | 2–6% |
| Restaurants | 60–70% | 2–6% |
| Construction | 15–20% | 2–5% |
| Consulting / Services | 50–70% | 10–20% |
| E-commerce | 30–50% | 1–4% |
Understanding your margins is foundational to business financial planning. Use the net worth calculator to track how business equity fits into your overall financial picture, or the compound interest calculator to model reinvesting retained earnings over time.
Frequently Asked Questions
What is a good profit margin for a small business?
It varies widely by industry, but a net profit margin above 10% is generally considered healthy for most small businesses. Service businesses (consulting, agencies) typically see 15–30% net margins, while retail or food businesses operate at 2–6%. Compare yourself to industry benchmarks rather than a universal standard.
How do I find my selling price if I know my desired margin?
Use the formula: Selling Price = Cost ÷ (1 − Desired Margin). For example, to achieve a 30% margin on a $50 item: $50 ÷ (1 − 0.30) = $50 ÷ 0.70 = $71.43. The "Find Target Price" tab on this calculator does this automatically.
Is a 100% markup the same as a 50% margin?
Yes. If you double your cost (100% markup), the profit is equal to the cost, which is half of the selling price — a 50% gross margin. This is a common point of confusion in retail pricing.
Should I price based on margin or markup?
Most financial reporting and investor analysis uses margin (profit as % of revenue). However, many retailers and manufacturers traditionally use markup internally for pricing decisions. Whichever you use, be consistent and understand the difference so you don't undercharge.
What's the breakeven point?
Breakeven is where total revenue equals total costs — zero profit and zero loss. To find it: Breakeven units = Fixed Costs ÷ (Selling Price − Variable Cost per unit). If your gross margin is 40% and your fixed costs are $10,000/month, you need $25,000 in monthly revenue to break even.
