Profit Margin Calculator

Profit margin is the share of every unit of currency you collect that stays with you after purchase cost. It is the figure you compare product against product and supplier against supplier, because it depends on the ratio rather than the size of the amount.

Margin is NOT markup

Margin and markup describe the same profit from two different angles. Margin is profit divided by the selling price; markup is profit divided by cost. The same product can have a 50% markup but only a 33.33% margin — and confusing the two is one of the most common pricing mistakes shop owners make.

Margin % = (Price − Cost) / Price × 100 | Markup % = (Price − Cost) / Cost × 100

Three calculation modes

• Find margin: enter cost and price, get the margin and markup percentages.
• Find price: enter cost and your target margin, get the exact price to charge.
• Find cost: enter price and target margin, get the maximum cost you can pay for the item.

Worked example

1. Cost per unit: 80
2. Selling price: 100
3. Profit per unit: 100 − 80 = 20
4. Profit margin = 20 ÷ 100 = 20%
5. Markup = 20 ÷ 80 = 25%

Practical tips

• Compare products by margin, not absolute profit: a product that earns more per unit may tie up more capital and turn over more slowly.
• If you import, use landed cost rather than the invoice price alone: freight, insurance, duty and clearance all belong in cost before the margin is calculated.
• Payment gateway and international transfer fees come out of the margin — add them to cost or subtract them from price before calculating.
• A margin that looks healthy on a slow-moving product can be worse than a smaller one that turns over three times in the same period.