📉 Profit Margin Calculator

Margin and markup are the most-confused pair in small-business pricing — mixing them up quietly destroys profitability. Enter cost and price to get both, correctly.

Margin vs markup, settled

Margin is profit as a share of price: (price − cost) ÷ price. Markup is profit as a share of cost: (price − cost) ÷ cost. A $24 cost sold at $40 is a 40% margin but a 67% markup — same transaction, different denominators. The dangerous mistake runs one way: a shop owner who wants a 50% margin and therefore "adds 50%" to cost gets only a 33% margin and wonders where the profit went.

Pricing for a target margin

To hit margin m, divide — don't multiply: Price = Cost ÷ (1 − m). For a 50% margin on a $24 cost: 24 ÷ 0.5 = $48, not $36. This one formula is worth more than most pricing courses.

What is a "good" margin?

Entirely industry-dependent. Grocery retail survives on 1–3% net margins through volume; software and digital products run 70–90% gross margins; restaurants typically land at 3–9% net after labor and rent. Compare yourself with your industry, not with headlines. Two universal rules: know your margin on every product (many businesses lose money on some items without noticing), and remember gross margin still has to cover all fixed costs before anything is truly profit — our break-even calculator picks up exactly there.

Frequently asked questions

Which costs belong in 'cost per unit'?

For gross margin: direct costs of the product — purchase or manufacturing cost, inbound shipping, packaging, payment fees. Rent and salaries stay out; they belong to the fixed-cost side of a break-even analysis.

Why do retailers talk about 'keystone' pricing?

Keystone means doubling cost (100% markup, 50% margin) — a traditional retail default. It is a starting point, not a law; competitive categories run thinner, and unique or service-heavy products can run much thicker.

Can margin exceed 100%?

Margin cannot — it is capped below 100% because price is the denominator. Markup can be any size: sell a $5 item for $50 and the markup is 900% while the margin is 90%.

This calculator is for educational purposes only and does not constitute financial advice. Results are estimates based on the inputs and assumptions shown.