Profit Margin Calculator

Profit margin and markup are two of the most important figures in business, and they're often confused. Both describe the gap between what something costs you and what you sell it for, but they express it differently — and mixing them up can lead to underpricing and lost profit.

Gross profit is the simplest figure: selling price minus cost. If you buy an item for $60 and sell it for $100, your gross profit is $40. From there, profit margin and markup take different reference points.

Profit margin expresses profit as a percentage of the selling price. In the example, $40 profit on a $100 sale is a 40% margin. Margin can never exceed 100%, and it answers the question 'what share of my revenue is profit?' It's the figure investors and managers focus on because it shows how efficiently a business turns sales into profit.

Markup expresses profit as a percentage of the cost. The same $40 profit on a $60 cost is a 67% markup. Markup answers 'how much did I add on top of my cost?' and is what many retailers use when pricing from a supplier cost. Crucially, a given markup always produces a smaller margin — a 50% markup is only a 33% margin — which is why confusing the two leads to thinner profits than expected.

Understanding both lets you price deliberately. If you need a certain margin to cover overheads and make a profit, you can work backward to the price or the required markup. Comparing margins across products reveals which lines are most profitable, and tracking margin over time shows whether rising costs are quietly eroding your profitability.

Keep in mind that gross margin doesn't account for operating expenses like rent, wages and marketing — net profit margin does. This calculator focuses on the gross figures that drive pricing decisions; for overall profitability, subtract all operating costs from revenue.