Margin Calculator

Calculate gross profit margin, markup percentage, and selling price. Understand the difference between margin and markup to price products correctly.

Margin Calculator

$

Price per unit or total revenue

$

Cost per unit or total cost (COGS)

Reverse Calculator

$

Your cost per unit

%

Target gross margin percentage

Enter revenue and cost to calculate margins

See gross margin, markup percentage, and detailed analysis

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Pro Tip

When setting prices, always work with margin (not markup) to ensure your target profitability. A common shortcut: to achieve a 30% margin, divide your cost by 0.70. For 40% margin, divide by 0.60. This ensures you hit your profit target every time.

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Understanding Margin vs Markup

Margin and markup are two different ways of expressing the same relationship between cost and price, but confusing them is one of the most common and costly mistakes in business. Both measure profitability, but they use different bases for calculation, leading to very different percentages for the same transaction.

Gross margin (or profit margin) expresses profit as a percentage of the selling price (revenue). If you sell a product for $100 and it costs $60, your gross margin is 40% because $40 is 40% of $100. Margin is always the view from the customer-facing side: how much of the revenue is profit.

Markup expresses profit as a percentage of the cost. Using the same example, the markup is 66.7% because $40 is 66.7% of $60. Markup is always the view from the supply side: how much you added on top of cost.

This distinction matters enormously. If a business targets a 40% margin but mistakenly applies a 40% markup, the actual margin achieved is only 28.6%. On $1 million in revenue, this mistake would mean $114,000 less profit than expected. Always clarify whether a target is margin or markup.

Margin can never exceed 100% (that would mean zero or negative cost), while markup has no upper limit. A margin of 50% equals a markup of 100% (you doubled the cost). As margin approaches 100%, markup approaches infinity.

Margin and Markup Formulas

Margin & Markup Formulas

Gross Margin % = (Revenue − Cost) / Revenue × 100

Where:

Gross Profit = Revenue - Cost

Gross Margin % = (Gross Profit / Revenue) x 100

Markup % = (Gross Profit / Cost) x 100

Selling Price from Margin = Cost / (1 - Desired Margin %)

Example

A product costs $60 and sells for $100:

  • • Gross Profit = $100 - $60 = $40
  • • Gross Margin = $40 / $100 x 100 = 40%
  • • Markup = $40 / $60 x 100 = 66.67%
  • • Reverse: For 40% margin on $60 cost: $60 / (1 - 0.40) = $100

Frequently Asked Questions

What is the difference between margin and markup?
Margin is profit as a percentage of the selling price (revenue), while markup is profit as a percentage of the cost. For example, if a product costs $60 and sells for $100, the margin is 40% ($40/$100) but the markup is 66.7% ($40/$60). They describe the same profit differently.
Why does margin vs markup confusion matter?
Because the percentages differ significantly. If you target a 50% margin but apply a 50% markup instead, your actual margin is only 33.3%. On large revenue, this mistake costs substantial profit. Always be explicit about whether you are discussing margin or markup.
What is a good profit margin?
It varies greatly by industry. Grocery stores often operate at 1-3% net margins, while software companies may achieve 60-80% gross margins. Service businesses typically see 15-30% margins. Compare against industry benchmarks rather than an absolute number.
How do I convert between margin and markup?
Markup % = Margin % / (1 - Margin %). Margin % = Markup % / (1 + Markup %). For example, a 25% margin equals a 33.3% markup: 0.25 / (1 - 0.25) = 0.333. And a 50% markup equals a 33.3% margin: 0.50 / (1 + 0.50) = 0.333.
Is gross margin the same as net margin?
No. Gross margin only considers the direct cost of goods sold (COGS). Net margin accounts for all expenses including overhead, salaries, rent, marketing, taxes, and interest. Gross margin is typically much higher than net margin. Both are important indicators.