Profit Margin Calculator
Calculate gross profit margin and markup percentage
Enter values above to calculate
How to Use
- Enter the selling price (revenue) in the Revenue field.
- Enter the cost of the product or service.
- Click 'Calculate' to see gross profit, margin percentage, and markup percentage.
- Margin and markup are related but calculated differently.
- Use this for pricing products to ensure adequate profit margin.
About Profit Margin
Gross Margin Formula
Gross Margin = (Revenue − Cost) / Revenue × 100%. For example, if you sell a product for $100 and it cost $60 to produce, Gross Profit = $40, Gross Margin = 40/100 = 40%. Gross margin measures profit as a percentage of revenue and is a key indicator of business profitability.
Margin vs. Markup
Margin and markup are often confused. Margin = (Revenue − Cost) / Revenue. Markup = (Revenue − Cost) / Cost. For the same numbers: $100 revenue, $60 cost — Margin = 40%, Markup = 66.7%. Margin is always less than markup for the same transaction. Confusing them in pricing can be costly.
Industry Margin Benchmarks
Gross margin varies significantly by industry: Software/SaaS (60–80%), Retail fashion (45–65%), Grocery (20–25%), Restaurant food (65–70% on food, but net margin 3–9%), Auto dealer (2–5%), Professional services (50–70%), Manufacturing (25–40%). Net margin (after all expenses) is always much lower than gross margin.
Why Margin Matters
Gross margin must cover all other business expenses: rent, salaries, marketing, utilities, and provide net profit. A business with 20% gross margin needs expenses below 20% of revenue to be profitable. Higher margins provide more buffer and allow for pricing flexibility. Businesses should track margins carefully and compare to industry benchmarks.
Key Features
- Calculates gross profit in dollar amount
- Shows both gross margin % and markup % simultaneously
- Clear explanation of the difference between margin and markup
- Ideal for pricing decisions and profitability analysis