Margin Calculator

Calculate profit margin based on revenue and cost.

Revenue ($)Total selling price or income

Cost ($)Total cost of goods or services

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Enter your values and click Calculate

Profit margin is one of the most critical metrics in business — it shows how much of each dollar earned you actually keep as profit after covering costs. This calculator is used by retailers setting product prices, service businesses quoting jobs, wholesale buyers evaluating supplier deals, and freelancers assessing their effective hourly rate. Knowing your margin helps you quickly identify which products or services are driving profit and which are eating into it. A 40% margin means $0.40 of every dollar earned is retained, while the remaining $0.60 covers costs. The calculator also distinguishes margin from markup: a common and costly mistake is confusing the two, since markup uses cost as the denominator while margin uses revenue. You can also use margin to reverse-engineer a selling price from a target percentage using the formula: Price = Cost ÷ (1 − Margin). Whether you are reviewing existing financials or planning a new pricing structure, understanding margin prevents underpricing and supports smarter, data-backed decisions. Businesses that monitor gross margin regularly are better positioned to adjust pricing in response to rising costs, competitive pressure, or changing customer demand. Even a few percentage points of improvement in margin can translate to significantly higher profitability without requiring additional revenue.

How It Works

Profit margin measures how much of each dollar of revenue you keep as profit. The formula is: Margin (%) = (Revenue − Cost) ÷ Revenue × 100. First, gross profit is calculated by subtracting the cost from revenue. That profit is then divided by revenue — not by cost — and multiplied by 100 to express it as a percentage. This is the critical distinction between margin and markup: margin uses revenue as the denominator while markup uses cost. The calculator also outputs the cost ratio, which is the percentage of each revenue dollar consumed by costs. A 40% margin means for every $1 earned, $0.40 is profit and $0.60 covers costs. Higher margins indicate more efficient pricing or lower production costs relative to selling price.

Examples

Product selling for $1,000 with $600 cost

A typical retail or wholesale scenario.

Result: 40% profit margin, $400 gross profit.

Service priced at $250 with $80 cost

A service business with low direct costs.

Result: 68% profit margin, $170 gross profit.

Wholesale order: $5,000 revenue, $3,800 cost

A lower-margin wholesale transaction typical of commodity goods.

Result: 24% profit margin, $1,200 gross profit.

Frequently Asked Questions

What is a good profit margin?

It depends heavily on the industry. Retail businesses often operate at 5–20% net margins, while software and SaaS companies can see 60–80% gross margins. As a general rule, a gross margin above 50% is considered strong for most businesses, but always compare against industry benchmarks.

What is the difference between margin and markup?

Margin is profit expressed as a percentage of revenue, while markup is profit expressed as a percentage of cost. For the same transaction, markup will always be a higher percentage than margin. For example, buying for $60 and selling for $100 gives a 40% margin but a 66.7% markup.

How do I use margin to set a selling price?

If you know your cost and target margin, use: Selling Price = Cost ÷ (1 − Margin). For a 40% margin on a $60 cost: $60 ÷ (1 − 0.40) = $100. This differs from a markup calculation, which would give $60 × 1.40 = $84 — a common and costly pricing mistake.