Profit Margin Calculator
Enter your cost and selling price to instantly see your gross profit, profit margin percentage, and markup. Results update as you type.
Margin vs Markup: Margin is profit as a percentage of your selling price; markup is profit as a percentage of your cost. They are always different numbers — a 25% markup on a $80 cost gives a 20% margin on the $100 selling price.
All calculations run in your browser — no data is sent to a server or stored.
How to Calculate Profit Margin
Profit margin is one of the most fundamental numbers in any business. It tells you what share of every dollar of revenue you actually keep after paying for what you sold. Get it wrong and you can be busy, even growing, while quietly losing money.
The formula is straightforward: Profit = Revenue − Cost, then Margin % = (Profit ÷ Revenue) × 100. If a freelancer charges $1,500 for a project and their direct costs (software, subcontractors, materials) are $450, the profit is $1,050 and the gross margin is 70%. That margin still needs to cover overheads, taxes, and time before it becomes real take-home.
Margin vs Markup — They Are Not the Same
Margin and markup are the most commonly confused pair in pricing. Both describe profit, but they divide by different things:
- Profit margin = profit ÷ revenue (selling price)
- Markup = profit ÷ cost
A worked example makes this concrete. Say you buy a product for $80 and sell it for $100. Profit is $20.
- Margin: $20 ÷ $100 = 20%
- Markup: $20 ÷ $80 = 25%
Same product, same profit — but two different percentages. Markup is always higher than margin (because you divide by the smaller number). If a supplier quotes you a 50% margin, make sure they mean margin and not markup — the difference at scale can be enormous.
What Is a Good Profit Margin?
There is no universal answer — margins vary dramatically by industry, business model, and stage. A few rough reference points:
- Grocery / food retail: gross margins of 20–30% are common, but net margins land closer to 2–5% after operating costs. Volume is everything.
- Physical products / e-commerce: target 30–50% gross margin to have enough left to cover fulfilment, returns, and marketing.
- Consulting and freelance services: 40–70% gross margin is achievable since the main cost is time. Net margin depends on how efficiently you spend that time.
- SaaS / software: gross margins of 60–80% are typical at scale because marginal delivery cost (servers, support) is low relative to revenue.
- Restaurants: notoriously tight — gross margins around 60–70% on food, but after rent, staff, and wastage, net margins of 3–9% are considered healthy.
These are rough benchmarks, not guarantees. Your margin target should reflect your actual overhead structure and competitive position, not an industry average from a blog post.
Once you know your margin, put it on paper. Build a professional invoice in seconds with our free invoice generator, or browse invoice templates for your industry.
Frequently Asked Questions
What is profit margin?
Profit margin (or gross margin) is your profit expressed as a percentage of your selling price (revenue). If you sell something for $100 and it cost you $70 to produce, your profit is $30 and your profit margin is 30%. It tells you what proportion of each sale you keep after covering costs.
What is the difference between profit margin and markup?
Margin and markup both measure profit, but use different bases. Margin divides profit by revenue (the selling price). Markup divides profit by cost. A $20 profit on an $80 cost is a 25% markup — but the same $20 profit on a $100 selling price is only a 20% margin. Confusing the two is a common pricing mistake.
How do I calculate profit margin?
Profit margin % = (Revenue − Cost) ÷ Revenue × 100. For example: revenue $150, cost $90, profit = $60, margin = ($60 ÷ $150) × 100 = 40%. This calculator does it instantly as you type.
How do I calculate markup percentage?
Markup % = (Revenue − Cost) ÷ Cost × 100. Using the same example: ($60 ÷ $90) × 100 = 66.7% markup. Markup is always higher than margin for the same product because you divide by the smaller number (cost rather than revenue).
What is a good profit margin?
It depends heavily on industry. Grocery and food retail often runs 2–5% net margin because of high volume and thin spreads. Software and SaaS products can reach 60–80% gross margin. Consulting and freelance services commonly target 30–60% gross margin. Physical product businesses typically aim for 20–50% gross margin. These are rough benchmarks — your actual target should account for overheads, pricing strategy, and competitive position.