Profit Margin Calculator

Profit margin is your profit expressed as a percentage of your selling price. If you sell an item for $100 and it cost you $40, your gross profit is $60 and your gross margin is 60% ($60 divided by $100). Margin tells you how much of every sale you keep before overhead. It is the single most useful number for comparing the profitability of different products, because it is a percentage rather than a raw amount, so a $2 candy bar and a $2,000 laptop can be compared directly.

Margin and markup describe the same profit from two different angles. Margin is profit as a percentage of the selling price, while markup is profit as a percentage of the cost. On a $40 item sold for $100, the $60 profit is a 60% margin (60/100) but a 150% markup (60/40). Because the denominator differs, markup is always the larger number. Confusing the two is the most common pricing mistake: applying a 50% markup only gives you a 33% margin, not a 50% margin.

To hit a target margin, divide your cost by one minus the margin as a decimal. For a 50% margin, divide your cost by 0.50, which means doubling it: a $40 item must sell for $80. For a 60% margin, divide by 0.40, so $40 becomes $100. Do not simply add 50% to your cost, because that produces a 33% margin instead. Switch this calculator to the Cost and Margin mode and it does the division for you and shows the exact price to charge.

It depends heavily on your industry. Grocery stores and wholesalers often run on gross margins under 10%, restaurants and general retail land somewhere between 10% and 40%, while software and digital products can exceed 80% because their unit costs are tiny. As a rough rule, a 10% net margin is considered average, 20% is healthy, and 5% or below is thin across most small businesses. Compare yourself to businesses like yours rather than to a single universal benchmark.

Net margin accounts for overhead, not just the cost of the product itself. Start with your gross profit across all units sold, subtract fixed monthly costs like rent, salaries, software, and marketing, then divide the result by your total revenue. If you make $6,000 in gross profit on $10,000 of sales but spend $3,000 on overhead, your net profit is $3,000 and your net margin is 30%. Enter your monthly operating expenses and units in the optional fields to see this estimate instantly.

Gross margin only subtracts the direct cost of making or buying the product, so it measures the profitability of the product itself. Net margin goes further and subtracts all your operating expenses, such as rent, wages, utilities, and marketing, so it measures the profitability of the whole business. Gross margin is almost always higher than net margin. A business can have a strong 60% gross margin and still lose money if its overhead is too high, which is why you should watch both numbers.

Yes. This profit margin calculator is completely free to use with no signup or login required. Everything runs in your browser, so none of the numbers you enter are sent to a server or stored. You can switch between margin, markup, and net-margin calculations and change currencies as often as you like at no cost.