What price do I need for a target profit margin?

Divide the cost by 1 minus the target margin as a decimal. For a 30% margin on an item that costs $70: $70 ÷ (1 − 0.30) = $100. Check it: $30 profit ÷ $100 revenue = 30%. The markup on cost for the same sale is $30 ÷ $70 = 42.86%.

What is a good profit margin?

There is no single number. OpenStax's Introduction to Business textbook notes that good net profit margins differ widely by industry: a grocery store's might be below 1%, while a jewelry store's would probably be above 10%. Compare your margin with your own past results and with businesses like yours.

Is gross margin the same as net margin?

No. Gross margin uses gross profit, which is sales minus the cost of goods sold, divided by sales. Net profit margin uses net income, which is after all expenses, divided by sales. Enter only direct costs here to get gross margin, or all costs to get net margin.

Why does the calculator show a dash instead of a percentage?

Margin divides by revenue and markup divides by cost, and you can't divide by zero. If revenue is $0 the margin isn't defined, and if cost is $0 the markup isn't defined, so the calculator shows a dash rather than a misleading 0%.

Profit Margin Calculator

Enter revenue and cost to see your profit, your profit margin and your markup, side by side.

Enter your numbers

Revenue or selling price ($)

What the customer pays, before any sales tax.

Cost ($)

Direct costs only gives gross margin; all costs gives net margin.

Profit

$40.00

Margin

40.00%

Markup

66.67%

Breakdown

Revenue: $100.00
Cost: −$60.00
Profit (revenue − cost): $40.00
Margin (profit ÷ revenue × 100): 40.00%
Markup (profit ÷ cost × 100): 66.67%

Percentages are rounded to two decimal places. A loss shows as a negative profit, margin and markup.

Margin and markup formulas

Profit = Revenue − Cost

Profit margin = Profit ÷ Revenue × 100

Markup = Profit ÷ Cost × 100

Margin measures profit against the selling price. OpenStax's Principles of Finance describes profit margin as how much of each $1 of sales is returned as profit. Markup measures the same profit against cost. OpenStax's Contemporary Mathematics defines it as markup = percent markup × cost, so the selling price is cost × (1 + percent markup).

Whether you get a gross or a net margin depends on the cost you enter. Using only the cost of goods sold gives gross margin, which OpenStax defines as gross profit ÷ sales. Using all of your costs gives net profit margin.

Worked examples

An item costs $60 and sells for $100. Profit is $40, the margin is $40 ÷ $100 = 40.00%, and the markup is $40 ÷ $60 = 66.67%.
A 50% markup on a $100 cost gives a $150 price. The margin on that sale is $50 ÷ $150 = 33.33%.
An item that costs $100 sells for $50. The loss is $50, the margin is −100.00% and the markup is −50.00%.

When a sale makes a profit, the markup is always higher than the margin, because cost is smaller than revenue. Mixing the two up is how prices end up too low: a 30% markup gives only a 23.08% margin ($30 ÷ $130). If you think in markup, the markup calculator works the other way round.

The calculator accepts amounts from $0 to $1,000,000,000,000. It shows money to the cent and percentages to two decimal places. More background is in OpenStax's chapter on analyzing financial statements.

Frequently Asked Questions

What price do I need for a target profit margin?: Divide the cost by 1 minus the target margin as a decimal. For a 30% margin on an item that costs $70: $70 ÷ (1 − 0.30) = $100. Check it: $30 profit ÷ $100 revenue = 30%. The markup on cost for the same sale is $30 ÷ $70 = 42.86%.
What is a good profit margin?: There is no single number. OpenStax's Introduction to Business textbook notes that good net profit margins differ widely by industry: a grocery store's might be below 1%, while a jewelry store's would probably be above 10%. Compare your margin with your own past results and with businesses like yours.
Is gross margin the same as net margin?: No. Gross margin uses gross profit, which is sales minus the cost of goods sold, divided by sales. Net profit margin uses net income, which is after all expenses, divided by sales. Enter only direct costs here to get gross margin, or all costs to get net margin.
Why does the calculator show a dash instead of a percentage?: Margin divides by revenue and markup divides by cost, and you can't divide by zero. If revenue is $0 the margin isn't defined, and if cost is $0 the markup isn't defined, so the calculator shows a dash rather than a misleading 0%.

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