About the Margin Calculator
A margin calculator finds gross profit margin and markup from cost and selling price. Margin and markup are routinely confused, and the confusion costs businesses real money because the same percentage means very different things.
The formula
Margin = (revenue − cost) / revenue; Markup = (revenue − cost) / costMargin expresses profit as a percentage of the selling price; markup expresses it as a percentage of cost. Margin is always the smaller number.
How to use this calculator
- 1Enter your Cost ($). The field starts at
40, which you can overwrite. - 2Enter your Revenue / Selling Price ($). The field starts at
100, which you can overwrite. - 3Read the result straight away — it recalculates as you type, so there is no button to press. Use Share to copy a link that reopens the page with your exact numbers filled in.
Worked example
| Input | Value |
|---|---|
| Cost ($) | 40 |
| Revenue / Selling Price ($) | 100 |
Result
Gross Profit: $60.00
Profit Margin: 60.00%
Markup: 150.00%
Cost/Revenue Ratio: 40.00%
Those are the values the page loads with, so you can reproduce this result yourself and then change one field at a time to see what drives the outcome.
Understanding your result
The distinction has direct financial consequences. An item costing 40 dollars sold at 100 carries a 60 percent margin but a 150 percent markup. A business intending a 50 percent margin that applies a 50 percent markup instead prices at 60 rather than 80 — losing a third of the intended profit on every sale.
Margin is the more useful measure for analysis because it relates directly to revenue, which is what appears on the income statement. Markup is more convenient for pricing, since you start from cost. Knowing how to convert between them is what prevents the error: markup = margin / (1 − margin).
Things worth knowing
- Margin is calculated on revenue, markup on cost. Margin is always the smaller percentage.
- To convert margin to markup, divide margin by (1 − margin). A 50 percent margin is a 100 percent markup.
- Gross margin excludes overheads. Net margin after all expenses is the figure that determines profitability.
- A 100 percent margin is impossible, since it would require zero cost. A 100 percent markup simply means doubling.
- Discounting cuts margin disproportionately — a 10 percent discount on a 30 percent margin removes a third of the profit.
Frequently asked questions
What is the difference between margin and markup?+
Margin is profit as a percentage of the selling price; markup is profit as a percentage of cost. An item costing 40 and selling for 100 has a 60 percent margin and a 150 percent markup.
How do I convert markup to margin?+
Margin equals markup divided by (1 + markup). A 50 percent markup is a 33.3 percent margin. Going the other way, markup equals margin divided by (1 − margin).
What is a good profit margin?+
It varies enormously by industry — grocery retail operates on 1 to 3 percent net margins while software can exceed 30. Compare against sector benchmarks rather than an absolute standard.
How much does discounting cost me?+
More than the discount percentage suggests. On a 30 percent margin, a 10 percent discount removes a third of your profit, because the discount comes entirely out of margin.