Profit Margin and Markup Calculator

What this calculator answers

It works out the selling price, cost, profit, profit margin and markup of one item from any two of them: the price that gives a target margin, the margin a price already gives, or the most an item can cost at a set price. It also converts a margin to the matching markup and back, prices a whole list of costs at once, rounds prices up to a clean ending, and shows what a sale does to your margin.

Margin here means the margin on a sale of goods or services. It has nothing to do with a margin account at a broker, where you borrow to trade.

How to use it

• What you know: choose the pair of numbers you have. The fields change to match.
• Cost: what one unit costs you, in dollars. Include everything it takes to get the item ready to sell, such as the purchase price, shipping it in and packaging.
• Selling price: the price of one unit before sales tax or VAT. Tax is added on top of the price at the register, so it is not part of your margin.
• Profit margin and Markup: in percent. Type 45 for 45%, not 0.45. Under each field, a line shows the matching markup or margin as you type.
• Round the price (when the price is worked out): up to the next 5¢, 10¢ or whole dollar, or up to a price ending in .99. The figures are then recalculated at the rounded price.
• Sale discount (optional): percent off the selling price, to see the margin during a sale.
• A list of costs: add one row per product, or use Paste rows to paste a column of costs from a spreadsheet. Every cost is priced at the same margin or markup.

Results update as you type. The Try buttons set a $15.99 selling price, round the price up to .99, take 20% off in a sale, or price a list of four products at once. To compare two supplier costs or two price points, press Save for comparison, change the inputs and save again: each later scenario shows how far its price, profit and margin move from the first.

How to calculate profit margin

Profit margin is profit divided by the selling price. Markup is the same profit divided by the cost:

• $P$ is the selling price of one unit, before sales tax.
• $C$ is the cost of one unit.
• Margin and markup come out as decimals; multiply by 100 for percentages.

An item that costs $8.75 and sells for $15.99 makes $7.24 of profit, a margin of $7.24 ÷ $15.99 = 45.28% and a markup of $7.24 ÷ $8.75 = 82.74%. The Selling at $15.99 button loads this case.

How to set a selling price for a target margin

Divide the cost by one minus the margin, written as a decimal. With the margin $m$ or the markup $k$ as decimals:

Worked example: $8.75 cost, 45% target margin

A small roaster’s 12-ounce bag of coffee costs $8.75 to produce and pack, and the roaster wants a 45% margin.

1. Margin as a decimal: m = 45 ÷ 100 = 0.45.
2. Price: $8.75 ÷ (1 − 0.45) = $8.75 ÷ 0.55 = $15.91.
3. Profit: $15.91 − $8.75 = $7.16, which is 45% of the price.
4. Markup: 0.45 ÷ 0.55 = 0.8182, so the same $7.16 is 81.82% of the cost.
5. Price ÷ cost: 1 ÷ 0.55 = 1.8182, the multiplier a 45% margin puts on any cost.

A shelf price of $15.91 looks odd, so the Round up to .99 button moves it to $15.99. The profit becomes $7.24, the margin 45.28% and the markup 82.74%. Rounding only goes up, so the margin never ends up below the 45% you asked for. Rounding down to $14.99 instead would cut the margin to 41.63%.

The Price list button prices four coffee products at the same 45% margin, rounded up to .99. Their prices run from $5.99 to $40.99 and their margins from 45.28% to 46.58%, because each one rounds up by a different amount.

Margin vs. markup: what’s the difference?

Margin is profit as a share of the price; markup is the same profit as a share of the cost. The coffee’s $7.16 of profit is 45% of its $15.91 price but 81.82% of its $8.75 cost. Because the price is always bigger than the cost when there is a profit, the markup is always the larger of the two percentages.

So a 30% markup is not a 30% margin: it is 0.3 ÷ 1.3 = 23.08%. A 50% markup is a 33.33% margin, and doubling the cost (a 100% markup) gives a 50% margin. Choose Cost and markup and enter 100 to see it: $8.75 doubled is $17.50.

Markup to margin conversion table

When you enter a single cost, the result includes a fuller table (5% to 80% in 5-point steps, or common markups from 10% to 300%) with the price for your own cost in every row. It can be downloaded as a CSV file.

Why margin can never reach 100%

Margin stays below 100% because profit is the price minus a cost, so it can only equal the whole price when the cost is $0. Above 100%, the cost would have to be negative. If you type a margin of 100% or more, the calculator explains this instead of giving a price. A figure like 150% is almost always a markup, which has no upper limit.

The other edge cases are named rather than shown as errors:

• Cost of $0: the margin is 100%, and markup has no value, because it divides the profit by the cost.
• Price of $0: margin has no value, because it divides by the price. Giving the item away loses its whole cost, a markup of −100%.
• Price below cost: the margin and markup are negative, and the result says how much each sale loses.

What a sale does to your margin

A discount comes straight out of the profit, because the cost stays the same. Taking 20% off the $15.91 coffee gives a sale price of $12.73 and a profit of $3.98, a margin of 31.25%.

To earn the same gross profit, the roaster must sell 1.8 times as many bags, 80% more. That factor is the full-price profit divided by the sale profit, which works out as m ÷ (m − d) with the discount d as a decimal: 0.45 ÷ (0.45 − 0.20) = 1.8. The bigger the discount compared with the margin, the faster the extra sales needed climb.

A discount equal to the margin, here 45%, sells at exactly the cost. At 50% off, each bag sells for $7.95 and loses $0.80, and no amount of extra volume makes up the profit. Enter a Sale discount to see these figures for your own price, with a table of other discounts.

Reading the result

• The headline is the figure you asked for: the margin, the price, the most the item can cost, or the converted percentage.
• The six figures show price, cost, profit, margin, markup and price ÷ cost together. Each one says whether you entered it or how it was worked out.
• Where each sale goes splits the price into cost and profit; the profit’s share is the margin.
• How this was calculated repeats the formulas with your numbers, ending with the same formula for a spreadsheet.
• Price at other margins (or other markups, or cost at other margins) repeats the calculation for common percentages with your cost or price. When you typed the percentage, your own row is marked; when you typed a price, the note under the table says which rows your margin falls between.
• The price list table gives each item’s price, profit and margin, with a total for selling one of each; the tiles above it give the range of margins and markups. It downloads as a CSV file you can paste back into a spreadsheet.

Gross margin vs. net margin

This calculator gives gross margin: the price minus the cost of the item itself. Net profit margin divides net income, what is left after rent, wages, advertising and every other expense, by sales, so it is lower than the gross margin whenever the business has other expenses.

Contribution margin sits in between. It subtracts every variable cost, meaning each cost that rises with the number of units sold, not only the cost of the item. It is the figure a break-even calculation uses to find how many units cover the fixed costs.

Assumptions and limitations

• Figures are per unit, before sales tax or VAT, and gross: overheads are not subtracted.
• When you choose rounding, it only goes up, to whole cents; a price is never rounded down.
• A sale changes the price only. The cost stays the same, and “sales needed” compares gross profit, not the extra costs of running a sale or its effect on other products.
• In a conversion, the dollar figures use a $100 cost as an illustration; the percentages are the same for any cost.
• A price list uses one margin or markup of 0% or more for every item.
• Results are educational estimates, not accounting, tax or pricing advice.

Common pricing mistakes

• Adding the margin percentage to the cost. Adding 45% to $8.75 gives $12.69, which is only a 31.03% margin. For a 45% margin, divide by 0.55 instead.
• Dividing by the wrong number. Profit ÷ price is the margin; profit ÷ cost is the markup. Check which one a supplier, buyer or lender is quoting before you compare.
• Putting sales tax in the price. Sales tax is collected for state and local governments, so a price that includes it overstates the margin.
• Leaving costs out. Shipping the stock in and packaging it are part of the cost of each item; leaving them out makes every margin look better than it is.
• Rounding a price down to a charm price. Moving the coffee from $15.91 down to $14.99 looks like a small change, but it cuts the margin from 45% to 41.63%.
• Discounting past the margin. Any discount larger than your margin sells below cost, however many units it moves.