Profit Margin Calculator
Enter what something cost you and what you sell it for to get the profit, the margin and the markup in one go. Margin and markup are the two numbers people mix up most in pricing, and the gap between them is wider than it looks: a 50 percent markup is only a 33.3 percent margin. Figures are currency-neutral.
Last updated: June 2026
Enter your cost and selling price above.
Profit = price - cost · margin = profit ÷ price · markup = profit ÷ cost
Margin and markup are not the same number
Both describe the same profit, but they divide it by different things. Margin measures profit as a share of the selling price, which is the gross profit line in your accounts. Markup measures the same profit as a share of what the item cost you, which is what you actually apply when pricing from a supplier invoice. Because the price is always larger than the cost, the markup percentage is always the bigger number, and the gap widens fast: a 50 percent markup is a 33.3 percent margin, and doubling your money is a 100 percent markup but only a 50 percent margin.
The three formulas
Profit is simply the selling price minus the cost. Margin is that profit divided by the selling price. Markup is that same profit divided by the cost. If you want to work backwards from a target margin to a price, divide the cost by one minus the margin: a 60 cost at a 40 percent target margin needs a price of 60 divided by 0.6, which is 100. Pricing from markup is more direct, because you just multiply the cost by one plus the markup.
The mistake that quietly costs money
The common error is deciding on a margin and then applying it as a markup. Suppose your cost is 60 and you want a 40 percent margin. The correct price is 100, giving 40 of profit. Apply 40 percent as a markup instead and you price at 84, earning 24 of profit, which is a margin of only 28.6 percent. You have left 16 on the table on every unit, and nothing in the arithmetic tells you, because 40 percent looked like the number you asked for.
Worked example
An item costs 60 and sells for 100. The profit is 40. As a share of the 100 price, that is a 40 percent margin. As a share of the 60 cost, the same 40 is a 66.7 percent markup. Both figures are correct and describe the identical transaction; they only answer different questions. Quote margin to an accountant or investor, and think in markup when you are setting prices from a cost sheet.
Markup converted to margin
| Markup | Margin | Price on a cost of 100 |
|---|---|---|
| 10% | 9.1% | 110.00 |
| 20% | 16.7% | 120.00 |
| 25% | 20.0% | 125.00 |
| 50% | 33.3% | 150.00 |
| 100% | 50.0% | 200.00 |
| 200% | 66.7% | 300.00 |
Margin = markup ÷ (1 + markup). Margin can never pass 100 percent, and reaches it only on an item that cost you nothing; markup has no ceiling.
Frequently Asked Questions
What is the difference between margin and markup?
They describe the same profit against different bases. Margin divides the profit by the selling price, so it answers what share of your revenue you keep. Markup divides the same profit by the cost, so it answers how much you added on top of what you paid. Because the price is always higher than the cost, markup is always the larger percentage: a 50 percent markup is a 33.3 percent margin, and a 100 percent markup is a 50 percent margin. Confusing the two is the most common pricing error there is.
How do I set a price for a target margin?
Divide the cost by one minus the margin expressed as a decimal. For a 40 percent margin on a cost of 60, that is 60 divided by 0.6, which gives a price of 100. Do not multiply the cost by 1.4, because that applies 40 percent as a markup and lands you at 84, a margin of only 28.6 percent. The correct conversion is worth building into your pricing sheet once, since the error repeats on every product you price.
Why is my margin lower than I expected?
Almost always because a markup percentage was applied where a margin was intended. If you added 30 percent to your costs expecting a 30 percent margin, you actually earned a 23.1 percent margin. The other frequent cause is that the figure being called margin is gross margin, which counts only the direct cost of the goods. Rent, wages, software and marketing come out of that gross margin, so a healthy gross figure can still leave very little at the bottom.
Can a margin be more than 100 percent?
No. Margin is profit divided by the selling price, and the profit is only ever a part of that price, so margin approaches 100 percent without ever passing it: even a cost of almost nothing leaves a margin just under 100, and only a genuinely free item reaches exactly 100. Markup has no such ceiling, because it is measured against the cost. An item costing 1 and selling for 50 is a 4,900 percent markup and a 98 percent margin. If you see a margin above 100 percent quoted, it is a markup wearing the wrong label.
Which figure do retailers and trades actually use?
It splits by where you sit in the chain. Retail and finance generally talk in margin, because it maps directly onto revenue and appears in accounts and investor reporting. Trades, wholesalers and manufacturers often work in markup, because they price upward from a supplier invoice or a materials cost. Neither is wrong, but a quote can go badly astray when one side means margin and the other hears markup, so it is worth naming which you mean before agreeing a number.
Methodology and sources
This tool takes a cost and a selling price and returns the profit alongside both percentage views of it, so the margin and markup for the same transaction can be read side by side rather than confused.
- Method: Profit = selling price - cost. Margin = profit ÷ selling price × 100. Markup = profit ÷ cost × 100. To price from a target margin, price = cost ÷ (1 - margin). To convert between them, margin = markup ÷ (1 + markup).
- Standards and sources: Standard accounting definitions of gross margin and markup. There is no regulator setting these; the formulas are definitional and identical across jurisdictions.
- Assumptions and limits: This is gross margin: cost means the direct cost of the item, so overheads such as rent, wages, marketing and software are not deducted, and neither is tax. Net margin will always be lower. Selling below cost produces a negative profit, and both percentages are then negative. Markup cannot be calculated from a cost of zero. Figures are currency-neutral.
Reviewed and maintained by Rick Oosterling, a maker and developer who prices his own work and has made the markup-for-margin mistake in a real quote. Last reviewed: June 2026. This is a planning aid, not accounting advice; confirm treatment of costs and tax with your own bookkeeper.