📈 Business & Sales
Profit Margin Calculator
The ultimate tool for retailers and dropshippers. Calculate your Gross Profit, Margin Percentage, and Markup to ensure your pricing strategy is profitable.
What do you want to calculate?
Cost of Goods (COGS)
$50
Selling Price (Revenue)
$100
GROSS PROFIT
$50.00
✅ Net gain per unit
Gross Margin
50.00%
Markup
100.00%
Sale Price
$100.00
Cost
Profit
Margin vs. Markup: The Deadly Confusion
In business, "Margin" and "Markup" both describe profit, but they use different math. Confusing them can cause you to underprice your products and lose money.
🔵 Gross Margin
Profit ÷ Revenue- Definition: The percentage of the selling price that is profit.
- Use Case: Financial reports, investor meetings, overall business health.
- Limit: Can never reach 100% (unless cost is 0).
🟢 Markup
Profit ÷ Cost- Definition: The percentage added to the cost to set the price.
- Use Case: Setting prices, buying inventory, dropshipping.
- Limit: Can go above 100% (e.g., 200%, 500%).
The Essential Math Formulas
Gross Margin %
((Revenue - Cost) / Revenue) × 100
Markup %
((Revenue - Cost) / Cost) × 100
Price based on Margin
Cost / (1 - (Margin% / 100))
What is a "Good" Profit Margin?
Retail & E-commerce
Typically aim for 20% to 45% gross margin. High competition often drives this down.
Restaurants
Food margins are high (60-70%), but Net Margins are low (3-5%) due to labor and rent.
Software / SaaS
Very high margins, often 80% to 90%, as the cost of replicating software is near zero.
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Frequently Asked Questions
Why is my Margin lower than my Markup?
Margin is calculated based on the *selling price*, while Markup is based on the *cost*. Since the selling price is always higher than the cost (hopefully!), the margin percentage will mathematically always be lower than the markup percentage.
How do I calculate the selling price if I want a 40% margin?
Do NOT just add 40% to your cost. The correct formula is: Cost / (1 - 0.40). For example, if Cost is $100, Price = 100 / 0.60 = $166.66. Use the "Find Sale Price" mode above to do this instantly.
What is the difference between Gross and Net profit?
Gross profit is Revenue minus Cost of Goods Sold (COGS). Net profit takes Gross Profit and subtracts all other expenses like rent, salaries, tax, and marketing.
Can margin be more than 100%?
No. Since Margin is a portion of the selling price, it cannot exceed 100% (unless your cost is negative, which is impossible). Markup, however, can easily exceed 100%.
Why do retailers prefer "Margin"?
Retailers prefer Margin because it lets them compare profitability against their total revenue. If they make $1M in sales and have a 20% margin, they instantly know they have $200k gross profit.
Is COGS just the product cost?
It usually includes the raw material cost plus direct labor and shipping to get the product to you. It does not include indirect costs like office rent or advertising.
What is a 50% markup in margin terms?
A 50% markup equals a 33.3% gross margin. Example: Cost $100 + 50% markup = $150 Price. Profit is $50. $50 is 33.3% of the $150 selling price.
How do I increase my profit margin?
You can either increase your selling price (perceived value) or decrease your COGS (negotiate with suppliers, bulk buying).
Does this calculator handle VAT/GST?
This calculator focuses on base profitability. You should typically input pre-tax values for both Cost and Revenue to get an accurate operational margin.
What is "Keystone Pricing"?
Keystone pricing is a standard retail strategy where the product is priced at double the wholesale cost. This equates to a 100% Markup or a 50% Gross Margin.