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Profit margin calculator

Connect revenue, costs, profit, and margin.

  • Formula and assumptions shown
  • Table and CSV export
  • Runs in your browser

· How we check our calculators

Inputs

Results update as you type. Amounts in USD. Rates are your own assumptions.

Result

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Assumptions used

Calculated result—

Enter your numbers to see an estimate.

Notes and methodology

How it works

Profit margin measures profit as a share of revenue. Markup measures profit as a share of cost, so the two percentages answer different questions even when they use the same revenue and cost figures.

Formula

Profit = revenue − cost; margin = profit ÷ revenue; markup = profit ÷ cost.

Use the tool for a single product, service, or period. It does not classify accounting costs, estimate taxes, or decide whether a margin is healthy for an industry.

Read the full methodology

Assumptions

  • Revenue and cost are for the same product or period.
  • Revenue is greater than zero for a meaningful margin.
  • Cost is greater than zero for a meaningful markup.
  • The calculator does not apply accounting, tax, or inventory rules.

Worked example

$100,000 revenue and $70,000 cost

Profit is $30,000, margin is $30,000 ÷ $100,000 = 30%, and markup is $30,000 ÷ $70,000 = 42.86%.

Step by step

  1. Find profit. $100,000 revenue − $70,000 total cost = $30,000 profit.
  2. Divide profit by revenue for margin. $30,000 ÷ $100,000 = 0.30, the headline 30% profit margin. Each dollar of sales leaves 30 cents after the entered costs.
  3. Divide profit by cost for markup. $30,000 ÷ $70,000 = 0.428571, shown as 42.86%. Each dollar of cost was sold for about $1.43.
  4. Check one against the other. Margin = markup ÷ (1 + markup): 0.428571 ÷ 1.428571 = 0.30. Markup = margin ÷ (1 − margin): 0.30 ÷ 0.70 = 0.428571.

How to read your result

The headline is profit margin. The secondary results show profit in dollars, markup, and revenue, and the table lists revenue, cost, and profit with the two rates beside them. When cost is higher than revenue, profit and margin are negative. Markup shows as undefined when cost is zero, and revenue must be above zero for a margin to exist.

Which margin the result represents depends on what goes into total cost. Cost of goods sold alone gives gross margin; adding operating expenses such as rent and salaries gives operating margin; adding interest and income taxes as well gives net margin. The calculator does not sort costs into these groups, so the label belongs to whatever was entered.

Margin cannot reach 100% while costs are positive, but markup has no upper limit: selling at three times cost is a 200% markup and a 66.67% margin. Mixing the two up when setting prices is a common source of error. A 30% markup on a $70,000 cost gives $91,000 of revenue and a margin of 23.08%, not 30%.

What changes the result most

Costs
A 5% rise in cost, from $70,000 to $73,500, at the same revenue cuts profit to $26,500, margin to 26.5%, and markup to 36.05%. The $3,500 cost increase removes about 11.7% of profit.
Price or revenue
Revenue 5% higher, $105,000, at the same cost raises profit to $35,000, margin to 33.33%, and markup to 50%.
What counts as cost
Adding $10,000 of overhead to the $70,000 of direct costs ($80,000 in total) turns the same sales into a 20% margin and a 25% markup, which is why a gross margin and a net margin for one business can be far apart.

Questions

Why is markup higher than margin?

Markup divides by cost while margin divides by revenue. With a $60 cost and $100 sale, the denominators differ.

Can profit margin be negative?

Yes. If costs exceed revenue, the result is a loss and the margin is negative.

Does this calculate net margin?

Only if your entered cost includes all costs you want to count. The calculator does not decide which expenses belong in net income.

How do you convert markup to margin?

Margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin), with both written as decimals. A 42.86% markup is 0.4286 ÷ 1.4286 = 30% margin. A 50% markup is a 33.33% margin, and a 100% markup (selling at twice cost) is a 50% margin.

What is the difference between gross, operating, and net profit margin?

All three divide a profit figure by revenue; they differ in which costs are subtracted first. Gross margin subtracts only the cost of goods sold. Operating margin also subtracts operating expenses such as wages, rent, and marketing. Net margin subtracts everything, including interest and income taxes, and matches the bottom line of an income statement.

More in Everyday & business

Sources

These references explain the concepts behind the calculation. They do not endorse this site. Estimates leave out any cost or condition you did not enter.