Profit margin calculator

Margin from cost and price, or the price that gives the margin you want.

Formula Finance

Profit margin

Profit: US$40.00
Markup: ≈ 66.6667%

How it works

Margin is profit as a share of the selling price; markup is profit as a share of the cost. The same sale has a lower margin than markup.

To reach a target margin, divide the cost by (1 − margin). Adding the margin percentage to the cost instead gives too low a price, a very common pricing mistake.

Formula

Profit = price − cost
Margin = profit ÷ price × 100
Markup = profit ÷ cost × 100
Price for margin M = cost ÷ (1 − M ÷ 100)

Worked example

An item costing 60 that sells for 100 makes 40 profit: a 40% margin and a 66.67% markup. To earn a 40% margin on a cost of 60, the price must be 60 ÷ 0.6 = 100.

Questions people ask

Why isn’t a 40% markup a 40% margin?

A 40% markup on 60 gives a price of 84 and a profit of 24, which is only 28.57% of the price.

Is this gross or net margin?

Gross, if cost is the cost of the goods. Include overheads and taxes in the cost for an approximate net margin.