Margin and markup describe the same profit from two angles, and confusing them is one of the most common pricing mistakes. A 50% markup is only a 33.3% margin.
How to use it
Enter the unit cost and the selling price. To price a product for a target margin, type that margin into the result box and the price is solved.
Gross vs. net margin
This is gross margin on one product. Net margin also subtracts overheads such as rent, salaries and taxes, so it will be lower.
Inputs explained
| Field | What to enter |
|---|---|
| Cost | Amount in your currency |
| Selling price | Amount in your currency |
What each result means
- Gross margin = ([Selling price] – [Cost]) ÷ [Selling price] × 100
- Profit = [Selling price] – [Cost]
- Markup = ([Selling price] – [Cost]) ÷ [Cost] × 100
Example values
How the main result changes when Selling price changes and everything else stays at the example values above:
| Selling price | Gross margin (%) |
|---|---|
| 50 | -20 |
| 75 | 20 |
| 100 | 40 |
| 125 | 52 |
| 150 | 60 |
| 200 | 70 |
Formula
Margin = (price − cost) ÷ price × 100Markup = (price − cost) ÷ cost × 100Worked example
Cost 60, price 100.
Profit = 40. Margin = 40 ÷ 100 = 40%. Markup = 40 ÷ 60 ≈ 66.67%.
For a 44% margin the price must be 60 ÷ (1 − 0.44) ≈ 107.14.
Key terms
- Gross margin
- Profit as a percentage of the selling price.
- Markup
- Profit as a percentage of cost.
- Cost of goods sold
- Direct cost of producing or buying what you sell.
Frequently asked questions
How do I convert markup to margin?
Margin = markup ÷ (1 + markup), using decimals.
Can margin exceed 100%?
No. Margin approaches 100% as cost approaches zero; markup has no upper limit.
Which should I use for pricing?
Retail and finance usually quote margin; trades often quote markup. Know which one your target refers to.
What formula does the Profit Margin Calculator use?
Margin = (price − cost) ÷ price × 100.
Can I work backwards from the result?
Yes. Type the result you want into Gross margin and the calculator finds the matching selling price.