How to use this calculator
Choose one of three calculation modes using the tabs at the top. Enter your cost and selling price to see your margin and markup, or enter your cost and desired margin to find the right selling price, or enter your revenue and desired margin to find your maximum allowable cost.
Use the quick presets to load common industry scenarios instantly. The visual breakdown bar shows you at a glance how much of each dollar goes to cost versus profit.
Understanding margin vs. markup
This is one of the most common points of confusion in business pricing. Both margin and markup describe the relationship between cost and profit, but they use different reference points.
Profit marginanswers the question: “What percentage of my selling price is profit?” It divides profit by revenue. If you sell something for $100 and your cost is $60, your profit margin is 40%.
Markupanswers a different question: “How much did I add on top of my cost?” It divides profit by cost. In the same example, your markup would be 66.7% because you added $40 on top of a $60 cost.
The critical takeaway: a 50% markup does not equal a 50% margin. A 50% markup actually gives you only a 33.3% margin. Confusing the two can lead to significant pricing errors and lower-than-expected profits.
Typical profit margins by industry
| Industry | Gross Margin | Notes |
|---|---|---|
| Grocery / Supermarket | 1-3% | High volume, thin margins |
| Clothing Retail | 30-50% | Higher for branded goods |
| Restaurants | 60-70% | On food items; lower net margin |
| E-commerce | 25-45% | Varies by product category |
| SaaS / Software | 70-90% | Low marginal cost per user |
| Consulting / Services | 50-80% | Labor is primary cost |
| Manufacturing | 25-35% | Capital-intensive operations |
| Construction | 10-20% | Materials and labor heavy |
Frequently asked questions
What is the difference between profit margin and markup?
Profit margin is gross profit divided by revenue (selling price), expressed as a percentage. Markup is gross profit divided by cost. For example, if you buy a product for $60 and sell it for $100, the margin is 40% ($40/$100) and the markup is 66.7% ($40/$60). Margin is always lower than markup for the same transaction.
How do I calculate profit margin from cost and selling price?
Subtract the cost from the selling price to get gross profit, then divide gross profit by the selling price and multiply by 100. The formula is: Profit Margin = ((Selling Price - Cost) / Selling Price) x 100. For example, if cost is $30 and selling price is $50: margin = (($50 - $30) / $50) x 100 = 40%.
What is a good profit margin for a small business?
Good profit margins vary significantly by industry. Grocery stores typically operate on thin margins of 1-3%. Retail businesses generally target 25-50% gross margins. SaaS and software companies often achieve 70-90% gross margins. The key is to benchmark against your specific industry and ensure your margin covers all operating expenses with room for profit.
How do I convert markup to margin?
To convert markup to margin: Margin = Markup / (1 + Markup). For example, a 50% markup (0.50) converts to: 0.50 / 1.50 = 0.333, or 33.3% margin. To go the other way, Markup = Margin / (1 - Margin). A 25% margin converts to: 0.25 / 0.75 = 0.333, or 33.3% markup.
Why is my profit margin different from my net profit?
Gross profit margin only accounts for the direct cost of goods sold. Net profit margin subtracts all expenses including operating costs, rent, salaries, marketing, taxes, and interest. A business might have a 50% gross margin but only a 10% net margin after accounting for overhead. Both metrics are important: gross margin shows pricing efficiency, while net margin shows overall profitability.