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How to Use This Profit Margin Calculator
Using the calculator is simple. Enter your selling price in the revenue field and your cost in the cost field. Then click calculate to instantly see your gross profit, profit margin percentage, markup percentage, and break-even price.
- Enter your revenue or selling price.
- Enter your cost.
- Click Calculate.
- Review your profit, margin, markup, and break-even price.
This is especially useful when checking whether a product is priced high enough to stay profitable.
Profit Margin Formula
Profit Margin % = (Profit ÷ Revenue) × 100
Markup % = (Profit ÷ Cost) × 100
Break-Even Price = Cost
Profit margin shows how much of your revenue remains as profit after cost. Markup shows how much you added on top of cost. Both are useful, but they answer different pricing questions.
Example Profit Margin Calculation
Imagine you sell a product for $100 and your cost is $60.
- Revenue: $100
- Cost: $60
- Gross Profit: $40
- Profit Margin: 40%
- Markup: 66.67%
- Break-Even Price: $60
This means you keep $40 in gross profit on a $100 sale, and your selling price is 66.67% above cost.
What Is Profit Margin?
Profit margin is a percentage that shows how much profit you make from revenue after subtracting cost. It is one of the most common business metrics used in pricing, budgeting, and profitability analysis.
A higher profit margin generally gives you more room to cover overhead, marketing, payroll, and unexpected expenses. A lower margin can still work in some industries, but it often requires stronger volume and tighter cost control.
Profit Margin vs Markup
Profit margin and markup are closely related, but they are not the same thing. Profit margin is based on revenue. Markup is based on cost.
That is why the same sale can show two different percentages. For example, a product sold for $100 that costs $60 has:
- 40% profit margin
- 66.67% markup
If you mix up these two numbers, you can easily underprice your products. For a direct comparison, use the Margin vs Markup Calculator.
Tips for Using Profit Margin in Pricing
- Always know both your direct cost and your target margin before setting a selling price.
- Do not confuse margin with markup when pricing products.
- Review your margins regularly if supplier costs or operating costs change.
- Use margin together with break-even analysis to understand how much you need to sell.
- Compare product margins to identify your most profitable offers.
Common Profit Margin Examples
- $100 revenue, $60 cost = 40% margin
- $200 revenue, $120 cost = 40% margin
- $100 revenue, $50 cost = 50% margin
- $150 revenue, $90 cost = 40% margin
Related Calculators and Guides
Frequently Asked Questions
How do you calculate profit margin?
Profit margin is calculated as profit divided by revenue, multiplied by 100. Formula: Profit Margin % = (Revenue − Cost) ÷ Revenue × 100.
What is the difference between profit margin and markup?
Profit margin is based on revenue, while markup is based on cost. They are related, but they are not the same percentage.
What is gross profit?
Gross profit is the amount left after subtracting cost from revenue. Formula: Gross Profit = Revenue − Cost.
What is a good profit margin?
A good profit margin depends on the industry, business model, and cost structure. Some businesses work on lower margins and higher sales volume, while others need higher margins per sale.
Can I use this calculator for product pricing?
Yes. This calculator helps you understand gross profit, margin, and markup so you can make better pricing decisions.