Gross Profit Margin Calculator
Calculate profit, margin percentage and markup percentage from cost and selling price.
Why use this tool?
Find your profit, profit margin and markup from cost and selling price - and see why a 50% markup is only a 33% margin.
How to use it
- Enter the cost price.
- Enter the selling price.
- Read profit, margin % and markup %.
Profit, margin and markup
Enter what an item costs you and what you sell it for. Profit is selling price minus cost. Margin is that profit as a percentage of the selling price. Markup is the same profit as a percentage of the cost. They describe the same sale from two directions, which is why they give different numbers.
Example: cost $40, price $60. Profit is $20. Margin is $20 ÷ $60 = 33.3%. Markup is $20 ÷ $40 = 50%. So a 50% markup gives only a 33.3% margin, and confusing the two is one of the most common pricing mistakes.
Converting between markup and margin
Margin = markup ÷ (1 + markup). A 25% markup is a 20% margin, a 50% markup is a 33.3% margin, and a 100% markup (doubling the cost) is a 50% margin.
Markup = margin ÷ (1 − margin). To earn a 40% margin you need a 66.7% markup; for a 50% margin, a 100% markup. A margin can never reach 100%, because that would mean the item cost nothing.
Pricing for a target margin
To find the price that gives a margin you want, divide the cost by one minus the margin. For a $40 item and a 40% target margin: $40 ÷ (1 − 0.40) = $40 ÷ 0.60 = $66.67. Check it: profit is $26.67, and $26.67 ÷ $66.67 = 40%.
A common mistake is to add the margin percentage to the cost instead: $40 + 40% = $56, which is a 40% markup but only a 28.6% margin ($16 ÷ $56). On a product line, that gap can be the difference between a profit and a loss once other costs are paid.
Gross margin isn't the whole picture
This calculator works out gross margin: selling price against the direct cost of the item. It doesn't include rent, wages, marketing, payment fees, shipping or tax, which come out of the gross profit. A product with a healthy gross margin can still lose money overall if those costs are high, so use gross margin to compare products and prices, and look at net profit to judge the business as a whole.
Frequently asked questions
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a $40 cost gives a $60 price and a 33.3% margin. A 50% margin needs a 100% markup, an $80 price.
How do I price an item for a specific margin?
Divide the cost by (1 − target margin). For a 30% margin on a $70 cost: $70 ÷ 0.70 = $100.
What's a good gross margin?
It varies widely by industry. Grocery and fuel retailers often run on thin margins, while software and many services run much higher. Compare against businesses like yours rather than a single number.