Profit Margin Calculator

When this applies

• You are pricing a product and want to see the resulting margin.
• A supplier quoted a markup and you want the equivalent margin.
• You are comparing the profitability of two products.
• You want to know what price gives a target margin.

Cost INR 800, selling price INR 1,200

1. 1Profit = 1,200 - 800 = INR 400.
2. 2Margin = 400 / 1,200 x 100 = 33.33%.
3. 3Markup = 400 / 800 x 100 = 50%.

A margin of 33.33% is the same as a markup of 50%.

What this calculator does

Work out the profit per unit, the margin and the markup from a cost price and a selling price - and see why margin and markup are not the same number.

How this is calculated

Profit per unit is the selling price minus the cost. Margin is profit as a percentage of the selling price; markup is profit as a percentage of the cost. Because the two use different bases, markup is always the larger of the two for the same profit, which is a common source of confusion when a supplier quotes a markup rather than a margin.

The formula

Margin % = profit ÷ price · Markup % = profit ÷ cost

Common mistakes to avoid

• Treating markup as margin

  A 50% markup is a 33.33% margin. Reading a markup as a margin overstates profitability.

• Leaving costs out of the cost price

  Freight, packaging and payment fees are part of the cost. Excluding them inflates the margin.

• Confusing gross and net margin

  This is a product-level gross margin. Overheads have to come out before it is a net profit.

Frequently asked

What is the difference between margin and markup?

Margin is profit as a percentage of the selling price; markup is profit as a percentage of the cost. The same profit gives a higher markup than margin.

Which should I use?

Margin tells you what share of each sale is profit; markup tells you what to add to cost to reach a price. Use margin for profitability and markup for pricing.

Is this gross or net margin?

Gross margin on the product, using only its cost. It does not include overheads such as rent and salaries, which net margin would.

Why is my margin lower than expected?

A margin is easily overstated by leaving costs out of the cost price - freight, packaging, payment fees. Include them in the cost for a truer figure.

Can a margin exceed 100%?

Margin is a percentage of the selling price, so it is always below 100%. Markup, measured on cost, can be any size.