Profit Margin Calculator - Margin, Markup & Selling Price

How the Profit Margin Calculator Works

1. 01Choose the mode: cost plus revenue to analyze an existing price, or cost plus desired margin to find a new price.
2. 02Enter your cost per unit, including materials, labor, and direct expenses.
3. 03Enter the selling price, or the gross margin percentage you want to achieve.
4. 04Read the margin, markup, profit, or required selling price, and use the margin-versus-markup table to avoid mixing the two up.

Pricing With Margin and Markup

Margin and markup describe the same profit from two directions, and confusing them is one of the most expensive small-business mistakes. Margin divides profit by the selling price; markup divides it by the cost. Buy at 60, sell at 100: that is a 40% margin but a 66.7% markup. If you want a 40% margin and mistakenly apply a 40% markup, you end up selling at 84 instead of 100, silently giving away 16% of your intended revenue per unit. The reverse-price mode uses the correct formula, price equals cost divided by (1 minus margin), so a 40% target on a 60 cost correctly yields 100. When setting margins, work from your fully loaded cost: include shipping, payment processing fees, packaging, returns, and marketplace commissions, not just the wholesale price. Then check the result against your sector: grocery runs 20-30% gross margin, restaurants 60-70% on food, apparel 50-60%, software often above 80%, electronics retail sometimes under 15%. Your gross margin must also fund overhead and profit, so a price that only covers a thin gross margin leaves nothing for rent, salaries, and growth.

When to Use the Profit Margin Calculator

Use the analysis mode when reviewing the profitability of an existing product, checking a marketplace listing after fees, or auditing a quote. Use the pricing mode when launching a product, responding to a cost increase from a supplier, or standardizing prices across a catalog to a target margin. It is also the fastest way to translate between margin and markup when a supplier talks markup and your accountant talks margin.

Common Use Cases

• —Pricing a new product to hit a target gross margin from its fully loaded cost.
• —Auditing marketplace listings after commissions and payment fees to find unprofitable SKUs.
• —Repricing a catalog after a supplier cost increase while protecting the margin.
• —Translating a supplier's markup language into the margin language of your P&L.
• —Checking how sales commissions eat into the same profit pool. Commission Calculator - Flat & Tiered
• —Stripping VAT or sales tax from gross prices before margin math. Sales Tax Calculator - Add or Extract Tax

Expert Tips

• ✻Never apply a markup percentage when you mean a margin; the correct target-margin price is cost divided by (1 minus margin).
• ✻Compute margins on fully loaded costs including fees, shipping, and returns, or marketplace products will look profitable while losing money.
• ✻Keep a floor margin per category and check every discount against it; a 20% discount on a 30% margin product removes two thirds of the profit.

Frequently Asked Questions

What is the difference between margin and markup?→

Margin is profit divided by selling price; markup is profit divided by cost. Selling at 100 what cost 60 gives a 40% margin and a 66.7% markup. They describe the same profit relative to different bases.

How do I price for a target margin?→

Divide the cost by (1 minus the margin as a decimal). For a 40% margin on a 60 cost: 60 / 0.6 = 100. Multiplying cost by (1 + margin) is wrong and underprices the product.

What is a good gross margin?→

It varies by industry: grocery 20-30%, restaurants 60-70% on food, apparel 50-60%, software 80% or more, electronics retail often under 15%. Compare against your sector, and remember gross margin still has to cover overhead.

Should cost include shipping and fees?→

Yes. Use the fully loaded cost per unit: product cost plus inbound shipping, packaging, payment processing, marketplace commissions, and expected returns. Otherwise the calculated margin overstates reality.