Profit Margin Calculator

Choose what you already know, fill in the matching boxes and the missing figures appear below. Boxes that your choice does not need are simply ignored, so you can switch between the four starting points without clearing anything first. A selling price below cost is accepted and shows as a negative margin, which is a quick way to see how deep a clearance sale cuts.

1. Under I know, pick one of four starting points: Cost and selling price, Cost and the margin I want, Cost and the markup I want or Selling price and the margin I want.
2. Enter the Cost, which is what the item costs you to buy or make.
3. Enter the Selling price if you chose the first or last option.
4. Enter the Margin or markup wanted (%) if you are working towards a target.
5. Set the Currency symbol, then read the margin, markup, gross profit and price, plus a table that converts common markups into margins.

Both describe profit, but they divide by different numbers. Margin = (price - cost) / price is the share of the selling price you keep. Markup = (price - cost) / cost is how much you add on top of cost. To set a price, use price = cost x (1 + markup) or price = cost / (1 - margin).

With a cost of 60 and a price of 100, profit is 40.00, margin is 40.00% and markup is 66.67%. The same item with a 25% markup sells for 75, which is only a 20.00% margin. Working backwards, a selling price of 100 with a 30% margin means a cost of 70 and a markup of 42.86%. Mixing the two up is the most common pricing error: adding 30% to cost does not give a 30% margin.

Which one you quote depends on who is listening. Shops and wholesalers often talk in markup because it is easy to apply to a cost list, while accountants and investors usually report margin because it shows how much of each sale is left after the goods are paid for. When a supplier says they work to a 50% margin and you assume 50% markup, your prices will be a quarter lower than theirs.

The calculator prints this table so you can translate between the two ideas quickly. The margin is always smaller than the markup and can never reach 100%, because the cost has to come out of the price.

A 100% markup, which doubles your money, is only a 50% margin. The result panel also shows that doubling price directly.

Read the table in either direction. If a competitor appears to keep a 33% margin, you know their markup is about 50%, so a 12 item costs them roughly 8. If you want a 40% margin, the table shows that a markup of 50% falls short, and you need about 67%. Between rows, you can enter the exact figure with the Cost and the markup I want option and compare the margin it prints.

These are gross figures: they stop at price minus cost. Rent, wages, marketing, returns, payment fees and tax all come out afterwards, so a healthy gross margin can still leave a thin net profit. The tool does not round prices to charm points such as 9.99 or add sales tax; for that, use the VAT and sales tax calculator.

• When running a sale, check the new margin with the discount calculator before you cut prices.
• To judge a whole investment rather than one product, use the ROI calculator.
• For other percentage questions, the percentage calculator covers the rest.

The output is an estimate for general information and is not financial or tax advice.