Profit Margin Calculator
Calculate gross profit, profit margin percentage, and retail markup percentage to price products profitably.
About the Profit Margin Calculator
The Profit Margin Calculator helps entrepreneurs, retailers, dropshippers, and small business owners accurately determine profitability and distinguish between Margin and Markup. Confusing these two metrics is one of the most common pricing mistakes in commerce.
Gross Profit Margin indicates what percentage of total revenue is retained after accounting for the Cost of Goods Sold (COGS). Markup reflects the percentage increase applied over the baseline cost to establish the retail selling price.
How to Calculate Profit Margin
Enter the Cost to acquire or produce the product (e.g., $40).
Enter the Revenue or target Selling Price (e.g., $100).
Click Calculate to see gross profit dollars, profit margin percentage, and required markup percentage.
Gross Margin and Markup Formulas
Gross Profit = Revenue - Cost Profit Margin (%) = (Gross Profit / Revenue) × 100 Markup (%) = (Gross Profit / Cost) × 100
Margin is calculated relative to revenue (selling price), whereas markup is calculated relative to product cost.
Variable Descriptions
- Cost
- Cost of Goods Sold (COGS) to acquire or produce the unit
- Revenue
- Selling price charged to the consumer
- Gross Profit
- Net revenue remaining after deducting direct production cost
Worked Example
Important Considerations & Tips
- Margin can never exceed 100%, whereas markup can be 200%, 500%, or higher.
- A 50% markup corresponds to a 33.3% margin. A 100% markup corresponds to a 50% margin.
- Net profit margin deducts overhead, marketing, and taxes in addition to direct production costs.
Frequently Asked Questions
What is the key difference between margin and markup?
Margin is profit divided by selling price (revenue). Markup is profit divided by cost. Margin measures what you keep from sales; markup measures what you add to costs.
Why is markup always higher than margin for the same item?
Because cost is always smaller than selling price for profitable goods. Dividing the same profit dollar by the smaller cost yields a higher percentage than dividing by revenue.
What is a good profit margin for retail businesses?
A healthy gross profit margin typically ranges from 40% to 60% for retail and e-commerce, while net profit margins typically range from 10% to 20%.
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