Profit Margin Calculator

What this calculates

Enter a cost and a selling price, and this shows the profit, the margin and the markup on the sale. Or enter a cost and the margin you want, and it works out the selling price that gives it — then checks that margin at the price it found.

Margin and markup are the two figures most often confused, and they are never the same number. Both are shown side by side, so the difference is on screen rather than in a footnote.

The formula

Everything starts from the profit, which is simply what the price leaves after the cost.

The margin and the markup both divide that same profit — by different things.

Because the price is always the larger of the two on a profitable sale, the margin is always the smaller percentage. To go the other way — from the margin you want to the price that delivers it — divide the cost by the share of the price it has to fill.

That last formula is why a margin can never reach 100%: at 100 the divisor becomes zero, and no price exists.

Worked example

Now sell the same item at a loss. A cost of 120 sold at 100 gives a profit of −20, which is a margin of −20% and a markup of −16.67%. Every figure turns negative, and the markup is still the higher of the two — on a loss as much as on a gain.

Then work backwards from the margin. For a 40% margin on a cost of 60, the cost has to fill 1 − 40 ÷ 100 = 0.6 of the price, so the price is 60 ÷ 0.6 = 100. That leaves 40 of profit, a markup of 66.67%, and — checking the answer — a margin of exactly 40% at that price.

When to use it, and the mistakes to avoid

Use it when setting a price, when checking whether a price covers what you need it to, when a supplier or buyer quotes a percentage without saying which one, and when comparing two items that cost different amounts.

The mistakes that cost the most:

• Confusing margin with markup. They divide the same profit by different amounts, so they are never the same number unless the profit is zero. A cost of 80 sold at 100 is a 20% margin but a 25% markup. Quoting one when the other is meant overstates or understates the profit by a wide gap, and the gap grows with the figure.
• Adding the target percentage to the cost. This is the classic trap. Wanting a 40% margin on a cost of 60, the tempting move is 60 + 40% = 84 — but 84 leaves 24 of profit, which is only a 28.57% margin. Adding 40% to the cost gives a 40% markup, not a 40% margin. The price that really gives 40% is 100.
• Expecting the textbook conversion to the last digit. Prices are rounded to an amount that can be charged, and the markup is worked out at that price. At a cost of 80 and a 40% target the exact price is 133.333…, charged as 133.33, which leaves 53.33 of profit and a real markup of 66.66% — not the 66.67% a cost of 60 gives, where the price comes out at exactly 100. The margin still reads 40%. On a very small cost the rounding can move the margin as well, and the calculator says so when it does.
• Aiming for a margin of 100% or more. Margin is a share of the price, so it cannot reach the whole of it unless the cost is nothing. A markup can run past 100%; a margin cannot.
• Leaving costs out of the cost. The margin is only as good as the cost you enter. If the item carries costs that are not in the figure, the margin describes a sale more profitable than the one you are making.
• Comparing unlike figures. If the price includes tax and the cost does not, or the other way round, the margin describes neither. Enter both on the same footing.

FAQ