Margin Calculator
Determine gross, operating, and net profit margins from revenue and cost figures to evaluate business profitability
Formula
Margin = (Revenue - Cost) / Revenue
Margin expresses profit as percentage of selling price. Markup expresses profit as percentage of cost. Same transaction, different reference points.
Worked Examples
Example 1: Calculate Margin and Markup
Problem:Product costs $60, sells for $100. Find margin and markup.
Solution:Profit = $100 - $60 = $40\n\nMargin = Profit ÷ Revenue\nMargin = $40 ÷ $100 = 40%\n\nMarkup = Profit ÷ Cost\nMarkup = $40 ÷ $60 = 66.7%\n\nNote: Same transaction, different percentages.\nMargin (40%) < Markup (66.7%) always.
Result:40% margin, 66.7% markup
Example 2: Price from Target Margin
Problem:Cost is $75. Need 35% profit margin. What's the selling price?
Solution:Formula: Price = Cost ÷ (1 - Margin)\n\nPrice = $75 ÷ (1 - 0.35)\nPrice = $75 ÷ 0.65\nPrice = $115.38\n\nVerify:\nProfit = $115.38 - $75 = $40.38\nMargin = $40.38 ÷ $115.38 = 35% ✓\n\nCommon mistake: $75 × 1.35 = $101.25 (this is 35% markup, not margin!)
Result:$115.38 selling price
Example 3: Discount Impact on Margin
Problem:Product sells for $200 with 40% margin. What's the margin after 15% discount?
Solution:Original:\nCost = $200 × (1 - 0.40) = $120\nProfit = $80, Margin = 40%\n\nAfter 15% discount:\nNew price = $200 × 0.85 = $170\nCost still = $120\nNew profit = $170 - $120 = $50\nNew margin = $50 ÷ $170 = 29.4%\n\nThe 15% discount cut margin from 40% to 29.4% - a 27% reduction in margin percentage!
Result:Margin drops from 40% to 29.4%
Frequently Asked Questions
What's the difference between margin and markup?
Margin = Profit ÷ Revenue (selling price). Markup = Profit ÷ Cost. If you buy for $50 and sell for $100: Margin = 50%, Markup = 100%. Margin is always lower than markup for the same transaction. Don't confuse them when pricing!
How do I calculate selling price from desired margin?
Selling Price = Cost ÷ (1 - Margin%). For 40% margin on $60 cost: $60 ÷ (1 - 0.40) = $60 ÷ 0.60 = $100. This ensures your profit divided by selling price equals desired margin.
What is a good profit margin?
Varies dramatically by industry. Grocery retail: 1-3%. Clothing retail: 4-13%. Restaurants: 3-9%. Software/SaaS: 70-90%. Manufacturing: 5-10%. Professional services: 15-40%. Compare to industry benchmarks, not across industries.
What's the difference between gross and net margin?
Gross margin = (Revenue - Cost of Goods Sold) ÷ Revenue. Net margin = (Revenue - ALL expenses) ÷ Revenue. A business with 60% gross margin might have 10% net margin after salaries, rent, marketing, etc.