📊 Finance Calculator

Profit Margin Calculator: The Complete Guide

Calculate gross margin and markup instantly. Everything you need to know — plus a free tool to do it instantly.

What is margin?

Margin and markup are two of the most confused concepts in pricing. Margin is profit as a percentage of the selling price. Markup is profit as a percentage of cost. If you cost $80 and sell for $100: margin = 20%, markup = 25%. Many businesses underprice because they confuse the two — applying a 20% markup thinking it means a 20% margin (it doesn't).

How it works

Enter your cost price and selling price. The calculator instantly shows net profit, gross margin %, markup %, and a brief explanation of how to use each in pricing decisions.

Why it matters

Setting prices based on a target margin is the correct approach. If you use markup to hit a target margin, you'll systematically underprice — losing profit on every sale.

Common mistakes

Confusing 20% markup with 20% margin — a 20% markup gives only a 16.7% margin
Not including all costs when calculating margin — overhead allocation is often missed
Setting prices based on competitor prices without knowing your own cost base

Best practices

Know your minimum acceptable margin (floor price) for every product
Price for value, not just cost-plus — customers pay for outcomes, not your costs
Review margins quarterly and eliminate low-margin lines ruthlessly

Ready to put this into practice?

Use the free Profit Margin Calculator to create a real margin in under a minute — no signup, exports to PDF and Excel.

Open Margin tool