Margin Calculator
Calculate profit margin from cost and selling price, and understand how margin differs from markup. No signup. Ideal for pricing, business and financial planning.
Result
| Profit | ||
|---|---|---|
| Profit Margin | ||
| Markup |
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This margin calculator works out your profit margin from the cost and selling price, along with the profit itself, directly in your browser. Enter the cost and price to see the margin as a percentage of the selling price. No account, no install, so business owners can understand their profitability on any device in seconds.
How to Calculate Profit Margin Step by Step
- Enter the cost. Type the cost of the product into the cost field. This is what it costs you to make or buy, before selling.
- Enter the selling price. Type the price you sell it for into the price field. The difference between price and cost is your profit.
- Calculate the margin. The tool works out the profit, the price minus the cost, and expresses it as a percentage of the selling price, giving the profit margin.
- Read the profit and margin. See both the profit amount and the margin percentage, so you understand both how much you make per sale and what proportion of the price is profit.
- Use the figures. Apply the margin to assess your profitability, compare products, set prices, or plan, knowing your margin as a percentage of revenue.
What Profit Margin Is and How It Works
Profit margin is a fundamental measure of profitability, expressing profit as a percentage of the selling price. It tells you what proportion of each sale's revenue is profit rather than cost. A margin reveals how much of what you charge you actually keep, making it a key indicator of the health and profitability of a product or business. It is expressed as a percentage of the price, which is what distinguishes it from markup.
The calculation is straightforward. The profit is the selling price minus the cost. The margin is that profit divided by the selling price, expressed as a percentage. So if a product's price is well above its cost, the margin is high, meaning a large share of the revenue is profit; if the price is only a little above cost, the margin is low. This per sale profitability is what the margin captures.
Margin is frequently confused with markup, but they are different measures with the same underlying profit. Markup expresses the profit as a percentage of the cost, while margin expresses it as a percentage of the selling price. Because the price is higher than the cost, the margin is always a smaller percentage than the markup for the same sale. Confusing them is a common and costly error that leads to mispricing and misjudging profitability.
Understanding margin is essential for running a profitable business. It lets you assess whether a product is profitable enough, compare the profitability of different products on a common basis, and make pricing decisions with a clear view of what you keep. Because margin is expressed relative to revenue, it is the natural measure for understanding profitability, complementing markup, which is used when pricing up from cost. A margin calculator makes this key figure easy to find.
Margin Versus Markup Explained
| Measure | Relative to | For the same sale |
|---|---|---|
| Margin | The selling price | The smaller percentage |
| Markup | The cost | The larger percentage |
| Tells you | Share of revenue kept as profit | How much added on cost |
| Confusing them | Leads to mispricing | Misjudges profitability |
Who Uses a Margin Calculator
Pro Tips for Working With Margins
Common Margin Mistakes to Avoid
Related Tools You May Need Next
For pricing up from cost, our Markup Calculator is the companion tool, since markup and margin are related measures. For discounts, the Discount Calculator helps, and the Percentage Change Calculator tracks changes.
Frequently Asked Questions
How do I calculate profit margin?
Enter the cost and the selling price, and the calculator works out the profit, which is the price minus the cost, then expresses that profit as a percentage of the selling price to give the margin. It shows both the profit amount and the margin percentage. This tells you how much you make per sale and what proportion of the selling price is profit, which is the key measure of profitability expressed relative to your revenue rather than your cost.
What is profit margin?
Profit margin is a measure of profitability that expresses profit as a percentage of the selling price. It tells you what proportion of each sale's revenue is profit rather than cost, revealing how much of what you charge you actually keep. A higher margin means a larger share of revenue is profit. Because it is expressed relative to the selling price, margin is the natural measure for understanding profitability, and it is a key indicator of the financial health of a product or business.
What is the difference between margin and markup?
Margin expresses profit as a percentage of the selling price, while markup expresses the same profit as a percentage of the cost. This is the key difference: margin is relative to price, markup to cost. Because the selling price is higher than the cost, the margin is always a smaller percentage than the markup for the same sale. They are related measures of the same underlying profit, but confusing them is a common and costly error that leads to mispricing and misjudging profitability.
Why is margin always smaller than markup?
Because margin is calculated relative to the selling price, which is higher than the cost that markup is calculated against. The same profit amount, expressed as a percentage of the larger selling price, gives a smaller percentage than when expressed as a percentage of the smaller cost. So for any given sale, the margin is always less than the markup. This is why treating a markup figure as if it were the margin overstates profitability, and why the two must be kept distinct.
Should I use margin or markup?
It depends on what you are doing. Use margin to understand profitability, since it tells you what share of your revenue you keep as profit, and it provides a common basis for comparing products. Use markup when pricing up from cost, since it tells you how much to add to the cost to reach a price. They are complementary: margin is the profitability view relative to revenue, while markup is the pricing view relative to cost. Understanding both, and not confusing them, is important for pricing correctly.
What costs should I include when calculating margin?
You should include all relevant costs, not just the most obvious ones, so the margin accurately reflects what you truly keep from each sale. If the cost figure omits some costs, the calculated margin is overstated, giving a falsely optimistic picture of profitability. Using a complete cost figure ensures the margin genuinely represents the profit you retain after all relevant costs, which is essential for making sound decisions about pricing, product profitability and the financial health of your business.
How does margin help me compare products?
Because margin expresses profit as a percentage of the selling price, it gives a common, comparable basis for assessing the profitability of different products regardless of their individual prices and costs. A product with a higher margin keeps a larger share of its revenue as profit than one with a lower margin, even if their actual prices and profits differ in absolute terms. This lets you compare how profitable different products are on an equal footing, informing decisions about which products to focus on or reprice.
Is the margin calculator free?
Yes, it is completely free with no account and no usage limit. You can calculate as many profit margins as you like, as often as you like, at no cost. It runs entirely in your browser on any device, so there is nothing to download or install, and the profit and margin percentage appear instantly whenever you enter a cost and selling price, helping you understand and manage your profitability.