data tool
Profit margin calculator
Margin is profit as a share of the selling price; markup is profit as a share of the cost. Enter any two of cost, price, margin and markup and the calculator gives the other two, the profit in dollars, and the price that hits a target margin.
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- Free, no sign in
- No watermark, no file limit
How it works
- 1
Choose what you know
Cost and price, cost and target margin, cost and markup, or price and margin.
- 2
Type the two numbers
Money in dollars and percentages as whole numbers, such as 40 for 40%.
- 3
Read the result
Price, profit, margin and markup appear together, with a warning if the price is below cost.
- 4
Use the table
The margin table shows the markup each margin needs and the price on your cost, with the nearest row highlighted.
Margin and markup in one line each
Margin is profit divided by the selling price. Markup is profit divided by the cost. Both start from the same profit, so they describe the same sale from opposite ends. An item that costs $60 and sells for $100 makes $40 profit: a 40% margin, because 40 is 40% of 100, and a 66.7% markup, because 40 is two thirds of 60. Markup is always the larger number, which is why confusing the two loses money: a business that wants a 40% margin and adds a 40% markup ends up at 28.6%.
Pricing to a target margin
To hit a margin, divide the cost by one minus the margin. For a 40% margin on a $60 cost, that is 60 divided by 0.6, or $100. The common shortcut of adding the margin percentage to the cost, 60 plus 40%, gives $84, which is only a 28.6% margin. The Cost and target margin option does the division for you, and the table under the result shows the price on your cost at every margin from 10% to 60%, so you can see what a few points of margin cost the customer.
The conversion table
A margin converts to a markup with margin divided by one minus margin, and a markup converts back with markup divided by one plus markup. A 20% margin needs a 25% markup, a 33.3% margin needs 50%, and a 50% margin needs a 100% markup, which is doubling the cost. Trades and retailers often price by markup because it is quicker to apply to a cost, while accounts and lenders talk in margins. Keeping the table nearby stops the two from being mixed up in a quote.
Gross margin and what it leaves out
This calculator works out gross margin on an item: price minus the direct cost of that item. It does not include the rent, wages, insurance and software that keep the business running. A healthy gross margin has to cover those overheads before there is any net profit. If your margins look fine but the business still struggles, add up a month of overheads and divide by the number of sales to see what each sale has to contribute, or use the break even calculator to find how many sales cover them.
Tax and margins
Work out margins on prices before GST or VAT. The tax is collected for the government, not earned, so including it inflates both the price and the apparent margin. In Australia a $110 price with GST is a $100 price for margin purposes. Settle the price before tax, then add the tax on top for the customer. The GST and VAT calculators on this site add or remove the tax at the right fraction.
From margin to a quote
Once the price is set, a quote turns it into something a client can accept. Business.gov.au describes cost plus pricing as working out the total cost and then adding a mark-up or margin, which is exactly what this calculator does per line. The proposals module builds quotes with a pricing table where each line has a quantity, a unit price and a tax rate, so the prices worked out here go straight onto the quote.
Limits
- One product or line at a time.
- Prices exclude GST or VAT. Take the tax off first with a GST or VAT calculator, then add it back to the price you settle on.
- Cost means the cost of the item itself. Overheads such as rent and wages are not included unless you add them into the cost.
- A margin of 100% or more is impossible, and the calculator says so rather than guessing.
What it does not do
- It does not set your prices for you.
- It does not account for discounts or payment fees; work those out separately.
- It does not store your figures.
Questions people ask
How do I calculate profit margin?
Subtract the cost from the selling price to get the profit, then divide the profit by the selling price and multiply by 100. A $150 sale of an item that cost $105 makes $45 profit, which is a 30% margin. Use prices before GST or VAT so the tax does not distort the result.
How do I price an item for a 40% margin?
Divide the cost by 0.6, which is one minus 40%. A $72 cost becomes a $120 price, leaving $48 profit, which is 40% of $120. Adding 40% to the cost instead gives $100.80 and only a 28.6% margin, so the division matters.
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a $100 cost gives a $150 price and $50 profit, which is a 33.3% margin. A 50% margin needs a $200 price, which is a 100% markup. The same profit looks larger as a markup because it is divided by the smaller number, the cost.
What is a good profit margin for a small business?
It varies widely by industry. Grocery and fuel run on thin margins with high volume, while services and software often carry much higher gross margins. Compare against businesses like yours, and check that your gross margin covers your overheads with some left over, which is the test that matters most.
Can a margin be more than 100%?
No. Margin is profit as a share of the price, and profit can never exceed the price unless the cost is negative. Markup has no ceiling: a $10 item sold for $50 has a 400% markup but an 80% margin. If a figure over 100% appears, it is a markup.
Turn the price into a quote
Take what you made here into proposals.
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Background reading: the question page on this.
Written and checked by the OneCraft team. Last checked .