# Profit Margin Calculator

> Profit margin = (selling price − cost) ÷ selling price × 100. An item that costs $60 and sells for $100 has a $40 gross profit, a 40% margin and a 66.67% markup. Enter cost and price to see all three, or set a target margin to get the price you need to charge.

- Interactive calculator: https://calculatorswithsteps.com/profit-margin-calculator
- Category: Financial Calculators
- Last updated: 2026-11-10
- Publisher: Calculators With Steps (calculatorswithsteps.com)

## How to use the profit margin calculator

Pick one of three modes:

1. **Margin and markup from cost and price.** Enter what the item costs you and what you sell it for. You get gross profit, gross margin and markup.
2. **Selling price for a target margin.** Enter the cost and the margin you want, such as 40%. The calculator gives the price to charge.
3. **Selling price from a markup.** Enter the cost and your markup percentage to get the price and the margin it produces.

Every mode also lists the price you would need at common margins from 10% to 70%, so you can compare pricing options quickly.

## Profit margin formula

**Gross profit = selling price − cost**

**Gross margin % = gross profit ÷ selling price × 100**

**Markup % = gross profit ÷ cost × 100**

**Price for a target margin = cost ÷ (1 − margin)**

In Excel or Google Sheets, with cost in A2 and price in B2, the margin is `=(B2-A2)/B2` and the markup is `=(B2-A2)/A2`, both formatted as percentages.

## Worked example

You buy a product for $60 and sell it for $100.

| Measure | Working | Result |
| --- | --- | --- |
| Gross profit | $100 − $60 | $40 |
| Gross margin | $40 ÷ $100 | 40% |
| Markup | $40 ÷ $60 | 66.67% |

Now suppose you price by adding a 50% markup to the same $60 cost. The price is $90, the profit is $30 and the margin is 33.33%. Same cost, different method, and a margin 6.67 points lower.

## Margin vs markup conversion table

Margin and markup describe the same profit from two angles. Margin divides by price, markup divides by cost.

| Gross margin | Equivalent markup |
| --- | --- |
| 10% | 11.11% |
| 20% | 25% |
| 25% | 33.33% |
| 30% | 42.86% |
| 40% | 66.67% |
| 50% | 100% |
| 60% | 150% |
| 70% | 233.33% |

Use **markup = margin ÷ (1 − margin)** and **margin = markup ÷ (1 + markup)** to convert any other value. A margin can never reach 100% unless the cost is zero, while a markup has no upper limit.

## Gross, operating and net profit margin

This calculator works out **gross margin**, which looks only at the direct cost of the goods sold. Two other margins appear on an income statement:

- **Operating margin** subtracts operating expenses such as rent, salaries and marketing, then divides by revenue.
- **Net margin** subtracts every expense, including interest and tax. A business with $500,000 of revenue and $40,000 of net income has an 8% net margin.

A healthy gross margin can still leave a thin net margin if overheads are high, so track both.

## Common profit margin mistakes

- **Mixing up margin and markup.** A retailer who asks for a 30% margin and gets a 30% markup ends up with only 23.08%. Always confirm which base a quoted percentage uses.
- **Leaving costs out.** Shipping, packaging, card fees and marketplace commissions are part of the cost of each sale. A seller who buys a product for ₹800 and sells it for ₹1,000 has a 20% margin, but a ₹100 marketplace fee cuts that to 10%.
- **Adding margins across products.** A 50% margin on a small item and a 20% margin on a large one do not average to 35%. Add up total profit and total revenue and divide those instead.
- **Ignoring returns and discounts.** Use the price you actually receive after coupons and refunds, not the list price.

## Pricing tips

- **Set prices from the margin you need.** Work out the gross margin that covers overheads and leaves a profit, then use the target-margin mode to price each product.
- **Watch discounts.** A 20% discount on an item with a 40% margin gives away half of its profit. Check sale prices with the [discount calculator](https://calculatorswithsteps.com/discount-calculator).
- **Keep tax out.** Sales tax and GST are collected for the government, so exclude them from both cost and revenue. The [sales tax calculator](https://calculatorswithsteps.com/sales-tax-calculator) and [GST calculator](https://calculatorswithsteps.com/gst-calculator) separate tax from a total.
- **Compare investments differently.** For a one-off investment rather than a product, the [ROI calculator](https://calculatorswithsteps.com/roi-calculator) is the better measure.

## Frequently asked questions

### How do I calculate profit margin?

Subtract cost from the selling price to get gross profit, divide the profit by the selling price and multiply by 100. A product that costs $60 and sells for $100 has a ($100 − $60) ÷ $100 = 40% gross margin.

### What is the difference between margin and markup?

Margin is profit as a share of the selling price; markup is profit as a share of cost. The same $40 profit on a $60 item sold for $100 is a 40% margin but a 66.67% markup, so markup is always the larger number.

### How do I find the selling price for a target margin?

Divide the cost by (1 − target margin). For a 40% margin on a $60 cost, the price is $60 ÷ 0.60 = $100. For a 25% margin on a $15 cost, it is $15 ÷ 0.75 = $20.

### Why does a 40% markup not give a 40% margin?

Markup is based on cost and margin on price. Adding 40% to a $60 cost gives an $84 price, but the $24 profit is only 28.57% of $84. To earn a 40% margin you need a 66.67% markup.

### How do I convert markup to margin?

Margin = markup ÷ (1 + markup). A 50% markup equals a 33.33% margin and a 100% markup equals a 50% margin. Going the other way, markup = margin ÷ (1 − margin).

### What is a good profit margin?

It depends on the industry. Grocery stores often run on thin net margins, while software and consulting firms can keep a much larger share of revenue. Compare your margin with businesses like yours and with your own past years rather than with a single universal figure.

### How do I calculate profit margin with GST?

Leave GST out of both cost and price, because it is collected for the government and claimed back as input credit. A product bought for ₹800 and sold for ₹1,000 before GST has a 20% margin and a 25% markup.

## Sources

- [Wikipedia – Profit margin](https://en.wikipedia.org/wiki/Profit_margin)
- [Wikipedia – Markup (business)](https://en.wikipedia.org/wiki/Markup_(business))

> Disclaimer: results are estimates for information and education, not financial advice. Confirm important decisions with a qualified professional.