Profit Margin & Markup Calculator
Turn a cost and a selling price into margin and markup, or start from the margin or markup you want and get the price. Add fees and extra costs, and see in plain numbers why a 25% markup is not a 25% margin.
Your result
Enter the numbers above to see the result.
For guidance only. Results are rounded to the currency's usual decimals. Real profit also depends on overheads, tax, returns and other costs this calculator does not know about, so check the figures against your own accounts before you set prices.
Margin and markup: same profit, different yardstick
Every sale leaves you with a profit, which is the selling price minus what it cost you. Margin and markup are two ways of expressing that profit as a percentage. They only differ in what you divide by. Margin divides the profit by the selling price. Markup divides it by the cost.
Take something you buy for 80 and sell for 100. The profit is 20. Measured against the price of 100, that is a 20 percent margin. Measured against the cost of 80, it is a 25 percent markup. Nothing about the deal changed between those two sentences, only the base of the percentage.
That is why the two get mixed up so often, and why mixing them up is expensive. A shop owner who wants a 30 percent margin and adds 30 percent to the cost ends up with a margin closer to 23 percent. On a thousand sales, that gap is real money.
How to use this calculator
- Margin & markup: enter your cost and your selling price. You get the profit, margin and markup.
- Price from margin: enter your cost and the margin you want. You get the price that delivers it.
- Price from markup: enter your cost and a markup. You get the price, plus the margin that markup really gives you.
- Highest cost: enter a selling price and a target margin to see the most you can pay for the product.
- Margin ↔ markup: type one and the other updates, so you can translate between the two instantly.
Open Fees, extra costs and quantity if you pay a marketplace commission, card fee, packaging or delivery, or want totals for a batch. Use the price before any sales tax, GST or VAT.
The formulas
Profit = price − cost
Margin = profit ÷ price × 100
Markup = profit ÷ cost × 100
Price from margin = cost ÷ (1 − margin)
Price from markup = cost × (1 + markup)
Markup = margin ÷ (1 − margin) Margin = markup ÷ (1 + markup)
In every formula the percentages are written as decimals, so 30 percent is 0.30. With fees taken from the selling price, the cost in the price formulas is replaced by the cost divided by one minus the margin minus the fee rate. The calculator does that rearrangement for you.
Worked examples
Finding margin and markup from two numbers
A product costs 60 and sells for 90. The profit is 30. The margin is 30 / 90 = 33.3 percent and the markup is 30 / 60 = 50 percent.
Setting a price for a target margin
You pay 40 for an item and want a 30 percent margin. Price = 40 / (1 − 0.30) = 40 / 0.70 = 57.14. The profit is 17.14, which is 30 percent of 57.14. Adding 30 percent to the cost instead gives 52, a profit of 12 and a margin of only 23.1 percent.
Allowing for fees and extras
An item costs 20 and packaging adds 3, so you pay 23 in total. A marketplace takes 10 percent of the selling price and you want a 25 percent margin. The price has to cover 23 plus the 10 percent fee plus your 25 percent profit, which leaves 65 percent of the price to cover the 23. So the price is 23 / 0.65 = 35.38. The fee is about 3.54 and the profit about 8.84, which is a margin of 25 percent give or take a penny of rounding.
The 25 percent trap
A markup of 25 percent means you add a quarter of the cost to the cost. A margin of 25 percent means a quarter of the price is profit. Those are not the same thing, because the price is bigger than the cost, so the same profit is a smaller share of it.
The gap widens as the numbers get bigger. A 50 percent markup is a 33 percent margin. A 100 percent markup, where you double the cost, is only a 50 percent margin. Use the two tables below to translate in either direction.
| Margin | Is a markup of |
|---|---|
| 5% | 5.26% |
| 10% | 11.11% |
| 15% | 17.65% |
| 20% | 25.00% |
| 25% | 33.33% |
| 30% | 42.86% |
| 40% | 66.67% |
| 50% | 100.00% |
| 60% | 150.00% |
| 75% | 300.00% |
| Markup | Is a margin of |
|---|---|
| 5% | 4.76% |
| 10% | 9.09% |
| 15% | 13.04% |
| 20% | 16.67% |
| 25% | 20.00% |
| 30% | 23.08% |
| 40% | 28.57% |
| 50% | 33.33% |
| 75% | 42.86% |
| 100% | 50.00% |
A simple rule of thumb: when someone quotes a percentage, ask what it is a percentage of. Retailers and accountants usually talk about margin, because it compares profit with sales. Wholesalers and builders often quote markup, because it is easy to add to a cost. Neither is wrong, as long as everyone knows which one is meant.
Gross margin, net margin and what this calculator covers
Gross margin looks at one product or one line of sales: revenue minus the direct cost of what you sold, divided by the revenue. Net margin is what is left of revenue after every cost, including rent, wages, software, interest and tax. Net margin is always smaller.
This calculator works at the product level. With just a cost and a price it shows a gross margin. If you add extra costs and a fee percentage, it moves closer to what is left after the costs that vary with each sale, but it does not know about fixed overheads. If a product has a healthy margin here and the business still struggles, overheads are the first place to look.
Do not include sales tax in the price
GST, VAT and sales tax are collected on behalf of the tax authority, so they are not part of your revenue. If you work out margin from a tax-inclusive shelf price, the result looks better than it really is. Strip the tax out first, either by dividing by one plus the rate or with the GST and VAT calculator, and use the price before tax here.
What a discount does to your margin
Discounts come straight out of profit, not out of the cost. Say an item costs 70 and sells for 100, a 30 percent margin. Selling it 20 percent off at 80 leaves a profit of 10 instead of 30, and a margin of 12.5 percent. You now need to sell three times as many to make the same total profit. Before you run a sale, work out the new margin with this calculator, and use the discount calculator to get the sale price.
Common mistakes
- Adding the margin percentage to the cost instead of dividing the cost by one minus the margin.
- Comparing your markup with a competitor's margin, or the reverse.
- Leaving out the small costs: payment fees, packaging, returns, delivery and the time you spend.
- Taking the fee as a percentage of cost when it is charged on the selling price.
- Using a price that includes tax.
- Setting one margin for everything, even though some products sell slowly and need a higher margin to be worth stocking.
Frequently asked questions
What is the difference between margin and markup?
Both describe the same profit, but they divide it by different things. Margin is profit divided by the selling price. Markup is profit divided by the cost. If something costs 80 and sells for 100, the profit is 20, so the margin is 20 percent (20 / 100) and the markup is 25 percent (20 / 80). Markup is always the bigger number, as long as there is a profit.
Is a 25 percent markup the same as a 25 percent margin?
No, and this is the most common pricing slip. A 25 percent markup means you add a quarter of the cost on top, so a cost of 80 becomes a price of 100. The profit of 20 is only 20 percent of that price, so the margin is 20 percent. To get a true 25 percent margin you would need a price of 106.67 on the same cost.
How do I calculate profit margin?
Subtract the cost from the selling price to get the profit, divide the profit by the selling price and multiply by 100. For a price of 90 and a cost of 60, the profit is 30 and the margin is 30 / 90 = 33.3 percent.
How do I calculate markup?
Subtract the cost from the selling price, divide the result by the cost and multiply by 100. For a price of 90 and a cost of 60, the markup is 30 / 60 = 50 percent. To go the other way and set a price, multiply the cost by 1 plus the markup as a decimal: 60 x 1.5 = 90.
How do I find the selling price for a target margin?
Divide the cost by 1 minus the margin as a decimal. For a cost of 40 and a target margin of 30 percent, the price is 40 / 0.70 = 57.14. Do not multiply the cost by 1.30. That gives 52, which is a 30 percent markup and only a 23.1 percent margin.
How do I convert markup to margin, and margin to markup?
Margin = markup / (1 + markup), and markup = margin / (1 - margin), with both written as decimals. A 50 percent markup is 0.5 / 1.5 = 33.3 percent margin. A 40 percent margin is 0.4 / 0.6 = 66.7 percent markup. The Margin and markup tab of the calculator does the conversion for you in both directions.
What is a good profit margin?
It depends heavily on the kind of business. Supermarkets and fuel retailers often keep only a few percent of sales as profit, while software, jewellery and many services run far higher. A good margin is one that covers your other costs, such as rent, wages, marketing and tax, and still leaves you a profit you are happy with. Compare against similar businesses rather than a single universal figure.
What is the difference between gross margin and net margin?
Gross margin only subtracts the direct cost of the goods or service you sold. Net margin subtracts everything: overheads, wages, interest and tax as well. This calculator works at the product level, so with only a cost it gives a gross margin. If you add fees and extra costs per unit it moves closer to a contribution margin, but it still does not include fixed overheads.
How do fees and extra costs change the result?
Open the Fees, extra costs and quantity section. Extra cost per unit (for example packaging or delivery) is added to your cost. A fee percentage (for example a marketplace or card fee) is taken from the selling price, so it grows as the price grows. Together they lower the profit and the margin, and the calculator then works out the price you need to hit your target after those fees.
Should I calculate margin before or after sales tax, GST or VAT?
Before. Sales tax, GST and VAT are collected for the government and are not your revenue, so use the price without tax when you work out margin. If you only know the tax-inclusive price, take the tax out first with the GST and VAT calculator, then use the net price here.
Can the margin be negative, and can it reach 100 percent?
Yes to the first. If you sell below cost the profit is negative and so is the margin. A margin of exactly 100 percent would need a cost of zero, and the formula cannot go beyond it, so the calculator limits margin inputs to below 100 percent. Markup has no upper limit: a 300 percent markup simply means the price is four times the cost.
Is anything I type saved or sent anywhere?
No. The sums run in your browser and nothing you enter is uploaded or stored on our servers.
Related calculators
Other tools you may find useful alongside this one: the GST and VAT calculator for taking tax out of a price, the discount calculator for sale prices, and the percentage calculator for quick percentage sums.