Profit Margin Calculator

Margin, profit and markup from price and cost.

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Currency

Selling price

Cost per unit

Your cost of goods sold per unit.

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Profit margin

40%

$40.00 profit per unit

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Profit

$40.00

$100.00 − $60.00

Markup

66.7%

on cost

Cost ratio

60%

of selling price

Where the selling price goes

Where the selling price goes
Item	Value
Selling price	$100.00
Cost	$60.00
Profit	$40.00

Profit margin is the share of each dollar of revenue that stays with you after covering the cost of what you sell. It's calculated as (selling price − cost) ÷ selling price. Markup is different: it's the same profit expressed as a percentage of cost, not of price. A 40% margin on a $100 sale means $40 profit; a 40% markup on a $60 cost means a $24 profit on an $84 price.

Recommendations

Track margin, not markup — margin aligns with your bottom line and how buyers compare prices.
Compare your margin against industry benchmarks to see if your pricing is in a healthy range.
Re-price regularly: if supplier costs rise, the same markup gives a smaller margin.

Watch out

Margin can never exceed 100%, and it drops quickly when costs rise — small cost increases erase most of a thin margin.

Pro tips

Use target-margin pricing: divide your cost by (1 − desired margin) to set prices that protect your margin.
A healthy gross margin gives room for overheads, marketing and profit; know yours before discounting.

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Profit margin is the most important number in pricing. It tells you how much of every sale survives as profit after covering the product's direct cost — and it's the figure that funds everything else in your business.

Margin vs markup — the confusion that costs money

Margin expresses profit as a share of the price customers pay; markup expresses it as a share of what you paid. Businesses that confuse the two routinely under-price: assuming a 50% markup on cost delivers a 50% margin overstates the real margin by a third.

Why margin matters more than price

A small change in margin has an outsized effect on profit. On a 20% margin, a 5% discount to win a sale means you must sell 33% more units just to make the same total profit. Pricing for margin protects your bottom line better than pricing for volume.

Setting prices from a target margin

The robust way to price is backwards: decide the margin you need, then set price = cost ÷ (1 − margin). If your cost is $60 and you need a 40% margin, price = 60 ÷ 0.6 = $100. This keeps profitability stable as costs change.

Frequently asked questions

Profit margin = (selling price − cost) ÷ selling price × 100. Selling at $100 with a $60 cost gives a 40% margin.

Margin is profit as a percentage of the selling price; markup is profit as a percentage of the cost. They are related: a 40% margin equals a 66.7% markup.

It varies by industry. Retail typically runs 5–20% gross margins, software and services 60–80%+. Compare against your own industry rather than a universal number.