Profit Margin Calculator
Enter what something costs you and what you sell it for. This gives the profit and both percentages — margin and markup — which are different numbers and are constantly confused for each other.
Margin
33.33%
- Profit
- $50.00
- Margin
- 33.33%
- Markup
- 50.00%
- Cost
- $100.00
- Price
- $150.00
- Price for 50% margin
- $200.00
- Margin is profit over the selling price. Markup is profit over the cost. They are never the same number, and mistaking one for the other is the most common pricing error there is.
- A 50% markup gives a 33.3% margin. To reach a 50% margin you need a 100% markup — you have to double the cost.
About the profit margin calculator
Margin is profit as a share of the selling price. Markup is profit as a share of the cost. They describe the same money from different ends, and mixing them up is the most common and most expensive arithmetic error in small business pricing.
An example makes the gap obvious. Something costing 100 and selling for 150 makes 50 in profit. As a share of the 150 you took, that is a 33.3% margin. As a share of the 100 you spent, it is a 50% markup. Same transaction, two very different percentages.
The trap is applying one when you meant the other. A shop wanting a 50% margin who applies a 50% markup ends up at 33.3% and quietly loses a third of its intended profit on every sale. To reach a 50% margin you need a 100% markup — you double the cost.
What it works out
- Profit, margin and markup from cost and price
- The price needed for a target margin
- Losses shown clearly as negatives
- Any currency — the arithmetic is the same
The formula
Margin = (price − cost) ÷ price × 100 Markup = (price − cost) ÷ cost × 100
Both start from the same profit — price minus cost — and differ only in what they divide by. Margin divides by the price, so it can never reach 100%: you would have to sell at infinite price for the profit to be the whole of it. Markup divides by the cost and has no upper limit at all.
That asymmetry is the practical difference. A 100% markup is ordinary and means doubling the cost. A 100% margin is impossible. If someone quotes you a percentage above 100, they are necessarily talking about markup.
Converting between them is straightforward once you see it. Margin equals markup divided by one plus markup. Markup equals margin divided by one minus margin. So a 50% markup is a 33.3% margin, and a 50% margin needs a 100% markup.
Which you use depends on the question. Retailers usually think in margin, because it answers what share of takings they keep. Manufacturers and trades often think in markup, because they start from a known cost and add to it. Both are correct; the error is only ever in swapping one for the other.
- Cost
- What the item costs you.
- Price
- What you sell it for.
- Margin
- Profit as a percentage of the price. Cannot exceed 100%.
- Markup
- Profit as a percentage of the cost. Has no upper limit.
A worked example
Something costing a hundred, sold for a hundred and fifty.
That works out to 33.33 %.
- Profit
- $50.00
- Margin
- 33.33%
- Markup
- 50.00%
- Cost
- $100.00
- Price
- $150.00
- Price for 50% margin
- $200.00
Questions
What is the difference between margin and markup?
Margin is profit divided by the selling price; markup is profit divided by the cost. Selling a 100 item for 150 gives a 33.3% margin and a 50% markup — the same 50 of profit expressed two ways.
How do I convert markup to margin?
Divide the markup by one plus the markup. A 50% markup is 0.5 ÷ 1.5, which is 33.3% margin. Going the other way, divide the margin by one minus the margin: a 40% margin needs a 66.7% markup.
What markup do I need for a 50% margin?
A 100% markup — you double the cost. This is where the confusion costs real money, because applying a 50% markup when you wanted a 50% margin leaves you at 33.3%.
Can margin be more than 100%?
No. Profit is part of the price, so it can approach but never reach the whole of it. Any percentage above 100 is necessarily a markup.
What is a good profit margin?
It varies enormously by sector — grocery retail runs on low single digits, software can run above 80%. The useful comparison is against others in your own industry rather than against a general figure.
Should cost include overheads?
For gross margin, no — just the direct cost of the goods or service. Overheads come out afterwards to give net margin. Mixing them gives you a number that is neither and is hard to compare with anything.