What is the difference between profit margin and markup?

Profit margin is the percentage of revenue that is profit (Profit ÷ Revenue × 100). Markup is the percentage added to cost to get the selling price (Profit ÷ Cost × 100). For example, if an item costs $60 and sells for $100, the margin is 40% but the markup is 66.7%.

What is a good profit margin for a small business?

It varies widely by industry. Service businesses often see margins of 15-30%, while retail typically ranges from 5-10%. Software and consulting can exceed 50%. Compare against your specific industry benchmarks rather than a universal number.

How can I improve my profit margin?

You can improve margins by increasing prices, reducing costs (negotiate with suppliers, reduce waste), improving operational efficiency, upselling higher-margin products or services, or shifting your product mix toward more profitable offerings.

Is gross margin the same as net margin?

No. Gross margin only subtracts direct costs (cost of goods sold) from revenue. Net margin also subtracts operating expenses, interest, and taxes, giving you the true bottom-line profitability of your business.

Profit Margin Calculator

Instantly calculate your profit, profit margin, and markup percentage. Just enter your revenue and cost to see the results.

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Revenue / Selling Price ($)

Cost ($)

Profit

$40.00

Margin

40.0%

Markup

66.7%

Breakdown

Revenue: $100.00
Cost: −$60.00
Profit: $40.00
Profit Margin (Profit ÷ Revenue): 40.00%
Markup (Profit ÷ Cost): 66.67%

Understanding Profit Margin

Profit margin is one of the most important metrics for any business. It tells you how much of every dollar in revenue you actually keep as profit after covering costs.

Profit Margin Formula

Profit Margin = (Revenue − Cost) ÷ Revenue × 100

Markup Formula

Markup = (Revenue − Cost) ÷ Cost × 100

Margin vs. Markup: A Common Confusion

Many business owners confuse margin and markup, but they're calculated differently. Markup is always a higher number than margin for the same transaction. A 50% markup on a $100 cost gives a $150 selling price — but that's only a 33.3% profit margin.

Understanding the difference is critical for pricing. If your target is a 30% margin, you need a 42.9% markup — not 30%.

Frequently Asked Questions

What is the difference between profit margin and markup?: Profit margin is the percentage of revenue that is profit (Profit ÷ Revenue × 100). Markup is the percentage added to cost to get the selling price (Profit ÷ Cost × 100). For example, if an item costs $60 and sells for $100, the margin is 40% but the markup is 66.7%.
What is a good profit margin for a small business?: It varies widely by industry. Service businesses often see margins of 15-30%, while retail typically ranges from 5-10%. Software and consulting can exceed 50%. Compare against your specific industry benchmarks rather than a universal number.
How can I improve my profit margin?: You can improve margins by increasing prices, reducing costs (negotiate with suppliers, reduce waste), improving operational efficiency, upselling higher-margin products or services, or shifting your product mix toward more profitable offerings.
Is gross margin the same as net margin?: No. Gross margin only subtracts direct costs (cost of goods sold) from revenue. Net margin also subtracts operating expenses, interest, and taxes, giving you the true bottom-line profitability of your business.

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