Profit Margin & Markup Calculator
Calculate profit margin from cost and sale price.
What you provide
Result
Profit margin %: 40%
Margin is profit as a share of the sale PRICE. It caps at 100% and is the figure that matters for how much of each sale you keep.
- Profit margin %
- 40%
- Profit
- 40
What this cannot tell you
- Pure arithmetic on the values you enter.
Take this with you
How this calculation works
Margin is the profit expressed as a share of the sale price. Enter what an item costs you and what you sell it for.
What the results mean
- Margin vs markup
- Margin is profit ÷ price (caps at 100%); markup is profit ÷ cost (can exceed 100%). They are different numbers for the same sale.
Common problems and fixes
- Pricing to a target margin left me short on every sale
- The markup formula was used where the margin one was needed. To hit a 40% margin, divide the cost by 0.6 rather than multiplying it by 1.4 — a £60 cost needs a £100 price, not £84. The error is invisible per unit and compounds across every sale, and it grows as the target percentage rises.
- The margin looks healthy but the business is not profitable
- This is gross margin, which counts only the direct cost of the item. Rent, wages, payment processing, returns, shipping and marketing all come out of it, and a strong gross margin can still leave nothing at the bottom. Track it as one input to pricing rather than as a measure of whether you are making money.
- Payment fees and shipping are not in the figure
- Include them in the cost side if you want a margin that reflects reality. Card processing at around 2% plus a fixed fee, packaging, and the cost of returns are all real per-unit costs, and on low-value items they can be most of the margin. Put them in the cost and the number becomes decision-useful.
Frequently asked questions
What is the difference between margin and markup?
Margin measures profit against the selling price; markup measures it against the cost. A product costing 60 and selling for 100 has a 40% margin (40÷100) but a 67% markup (40÷60). Confusing the two is a common and expensive pricing mistake.
Can margin exceed 100%?
No, by definition — it is profit as a share of the selling price, so it approaches 100% as cost approaches zero and can never pass it. Markup has no such ceiling: an item costing £1 and selling for £10 carries a 900% markup and a 90% margin. Seeing a figure over 100% is a reliable sign markup is being described as margin.
What margin should I be aiming for?
It depends entirely on the sector, and comparisons across sectors are meaningless. Grocery retail runs on low single-digit net margins with high volume; software and services often exceed 70% gross. The useful benchmark is your own history and your direct competitors, and the useful test is whether the margin covers your overheads with something left.
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