Profit Margin Calculator

Enter what an item costs you and what you sell it for to see your gross margin, markup and profit, or enter a target margin to get the price you need to charge.

What the item costs you: purchase price or direct cost to make it.

Gross margin
40%
Profit per item
$30.00
Markup on cost
66.67%
Cost as a share of price
60%
  • This is gross margin: it covers the item's direct cost only. Rent, wages, marketing and other overhead still come out of the profit shown here.

Common margins at this cost

Gross marginMarkup neededSelling priceProfit
10%11.11%$50.00$5.00
20%25%$56.25$11.25
25%33.33%$60.00$15.00
30%42.86%$64.29$19.29
40%66.67%$75.00$30.00
50%100%$90.00$45.00
60%150%$112.50$67.50

Margin vs markup: same profit, different yardstick

Margin and markup both describe the same dollars of profit. The difference is what you divide by. Gross margin divides profit by the selling price, so it tells you how much of every sales dollar you keep. Markup divides profit by cost, so it tells you how much you added on top of what you paid.

Because the selling price is always bigger than the cost when you make a profit, the margin percentage is always smaller than the markup percentage. An item that costs $45 and sells for $75 has a 66.67% markup but a 40% margin. Both are correct; they just answer different questions.

Margin is the number most businesses track, because it lines up with the income statement: revenue minus cost of goods sold is gross profit, and gross profit divided by revenue is gross margin. Markup is handy at the shelf, because you can multiply a cost by a factor to get a price.

The pricing mistake this calculator prevents

The classic error is wanting a 40% margin and adding 40% to cost. On a $45 item that gives $63, which is only a 28.57% margin. To hit a real 40% margin you divide cost by 1 minus the margin: $45 ÷ 0.60 = $75.

The gap grows as targets rise. A 50% margin needs a 100% markup (double the cost), and a 60% margin needs a 150% markup. Use the "cost and the margin I want" option, or the table under the result, to get the price directly.

What to include in cost

For gross margin, cost means the direct cost of the item you sold: the wholesale price for a retailer, or materials, direct labor and inbound shipping for a maker. Payment processing fees and packaging are often included too, as long as you are consistent.

Overhead such as rent, salaries, software and advertising is not part of gross margin. A healthy gross margin has to be large enough to pay for all of that and still leave a net profit, which is why a product can show a good margin while the business as a whole loses money. The break-even calculator shows how many sales it takes to cover those fixed costs.

The formulas

Profit = P − CGross margin = (P − C) ÷ P × 100Markup = (P − C) ÷ C × 100Price for a target margin: P = C ÷ (1 − M)
  • P = selling price (revenue per item)
  • C = cost of the item
  • M = target margin as a decimal (40% = 0.40)

Example

  1. You buy a product for $45 and sell it for $75.
  2. Profit = $75 − $45 = $30.
  3. Gross margin = $30 ÷ $75 = 0.40, or 40%.
  4. Markup = $30 ÷ $45 = 0.6667, or 66.67%.
  5. Working backward: for a 40% margin on a $45 cost, price = $45 ÷ (1 − 0.40) = $75.

Frequently asked questions

Is a 50% markup the same as a 50% margin?

No. A 50% markup on a $100 cost gives a $150 price and a 33.33% margin. A 50% margin needs a $200 price, which is a 100% markup.

How do I convert markup to margin?

Margin = markup ÷ (1 + markup). A 30% markup is 0.30 ÷ 1.30 = 23.08% margin. Going the other way, markup = margin ÷ (1 − margin), so a 25% margin is a 33.33% markup.

Can a margin be more than 100%?

No. Margin is profit as a share of the price, and profit can never be more than the whole price. Markup has no ceiling: selling a $10 item for $50 is a 400% markup but an 80% margin.

What is the difference between gross margin and net margin?

Gross margin subtracts only the direct cost of what you sold. Net margin subtracts every expense, including overhead, interest and taxes, so it is always lower. This calculator works out gross margin.

What does a negative margin mean?

You are selling below cost. Selling a $45 item for $40 is a $5 loss on each sale, a margin of −12.5%.

Sources

Last reviewed for 2026. How we calculate.