How to calculate profit margin
Profit margin tells you what share of each sale is profit. Subtract the cost from the selling price to get gross profit, then divide by the selling price and multiply by 100 for the margin percentage. The calculator also shows markup — the profit as a percentage of the cost — which retailers often use when setting prices.
Margin vs markup
They describe the same profit from two angles. Margin is profit ÷ price; markup is profit ÷ cost. Because price is larger than cost, markup percentages are always higher than the equivalent margin. Mixing them up is a common pricing mistake.
Frequently asked questions
Cost $40, price $100 — what's the margin?
Profit is $60. Margin = 60 ÷ 100 = 60%. Markup = 60 ÷ 40 = 150%.
What's a good profit margin?
It varies by industry. Many ecommerce stores aim for gross margins of 30-60%, but it depends on your costs and market.
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