Free tools / Profit margin calculator
Profit margin and markup calculator
Turn cost and price into margin and markup, or start from the margin you want and get the price to charge.
Cost and price
Margin is profit divided by price; markup is profit divided by cost. A 50% markup on a $60 cost is a $90 price and a 33% margin. Quoting the wrong one is how businesses price themselves into a loss.
Result
See margin by product, customer and month from your real numbers.
Start free with EazeAccountsHow to use it
Start from cost and price to see the margin you are actually making, or start from the margin or markup you want and get the price to charge. Cost should include everything it takes to deliver one unit: materials, direct labour, payment fees, shipping.
Gross margin is the number investors and lenders quote. Net margin, after rent, salaries and everything else, comes from your income statement, not from a single product.
Margin versus markup
Margin is profit as a share of the selling price. Markup is profit as a share of cost. A 50 percent markup is a 33 percent margin, and a 50 percent margin needs a 100 percent markup. Suppliers talk markup; accountants and investors talk margin. Mixing them up is one of the most common ways a small business prices below what it needs.
| Markup on cost | Gross margin on price |
|---|---|
| 10% | 9.1% |
| 20% | 16.7% |
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 66.7% | 40% |
| 75% | 42.9% |
| 100% | 50% |
| 150% | 60% |
| 200% | 66.7% |
| 300% | 75% |
The formulas
Margin = (price - cost) / price. Markup = (price - cost) / cost.
Price from cost and target margin: price = cost / (1 - margin). A $40 cost at a 30 percent margin is $40 / 0.70 = $57.14.
Price from cost and markup: price = cost x (1 + markup). A $40 cost with a 30 percent markup is $40 x 1.30 = $52.00, which is only a 23 percent margin.
Converting: margin = markup / (1 + markup), and markup = margin / (1 - margin).
Good questions. Clear answers.
Common questions.
Need a little more detail? We are happy to help.
Talk to our teamDivide the cost by one minus the margin. For a $40 cost and a 30 percent margin: $40 / (1 - 0.30) = $57.14. Multiplying the cost by 1.30 instead gives a 30 percent markup, which is only a 23 percent margin.
Margin is profit divided by the selling price. Markup is profit divided by the cost. The same sale always has a lower margin than markup: a 50 percent markup is a 33.3 percent margin.
Margin = markup / (1 + markup). A 25 percent markup is 0.25 / 1.25 = 20 percent margin. To go the other way, markup = margin / (1 - margin).
A 100 percent markup. Doubling the cost gives a price where half of every sale is profit.
It depends on the industry. Software and services often run gross margins above 60 percent; retail and restaurants are often between 20 and 40 percent. Compare against your own industry and against last year, not against a single benchmark.
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