Finance
Profit Margin Calculator
Calculate gross profit, profit margin, and markup from your cost and selling price. Free, instant, and no signup — perfect for pricing products and quoting jobs.
Enter a cost and selling price to see your margin.
✳ Free · No signup · Runs in your browser — we never store your numbers
Small business guide
What this tool helps you do
Use this free profit margin calculator to turn cost and selling price into the numbers that actually matter: gross profit, profit margin, and markup. It is built for small business owners who need quick pricing checks without opening a spreadsheet.
Profit margin is one of the fastest ways to see whether a product, service, or quote has enough room to cover overhead, taxes, payment fees, discounts, and still leave profit. The calculator does the arithmetic instantly, but the guide below explains how to read the result so you can price with more confidence.
How to use this tool
- 1
Enter the total cost to deliver the product, service, or job. Include direct materials, labor, packaging, payment processing, shipping, marketplace fees, or any other cost that changes with the sale.
- 2
Enter the selling price or revenue you expect to collect from the customer before sales tax.
- 3
Review gross profit first, then compare profit margin and markup. Margin tells you how much of the selling price remains as profit; markup tells you how much you added on top of cost.
- 4
Test a few selling prices. Small price changes can have a large effect on margin, especially when costs are high.
Formula
Gross profit = selling price − cost. Profit margin = gross profit ÷ selling price × 100. Markup = gross profit ÷ cost × 100.
- Margin uses selling price as the denominator, so it answers: what percentage of revenue is left after direct cost?
- Markup uses cost as the denominator, so it answers: how much did you add on top of cost?
- If cost is higher than selling price, margin and profit become negative — a useful warning before you quote or discount too aggressively.
Examples
Retail product pricing
A boutique buys a product for $40 and sells it for $100.
Inputs
- Cost: $40
- Selling price: $100
Result
Gross profit is $60, profit margin is 60%, and markup is 150%.
The item has strong gross margin, but the owner still needs to account for rent, staff, card fees, returns, and discounts before assuming net profit.
Service quote check
A designer pays a contractor $600 to help deliver a client project and charges the client $1,000.
Inputs
- Delivery cost: $600
- Client price: $1,000
Result
Gross profit is $400, profit margin is 40%, and markup is 66.67%.
A 40% gross margin may be healthy for a service if the remaining overhead is low, but it can be thin if revisions and project management time are not included in cost.
Key terms
Gross profit
The amount left after subtracting the direct cost of delivering the sale from the selling price.
Profit margin
Gross profit expressed as a percentage of the selling price or revenue.
Markup
Gross profit expressed as a percentage of the cost.
How to interpret the result
Use margin for business health
Profit margin is usually the better metric for understanding how much revenue you keep. It helps compare products, services, campaigns, and categories because everything is measured against selling price.
Use markup for pricing rules
Markup is useful when you price from cost. For example, a cafe might apply one markup to bottled drinks and another to prepared food. Just remember that markup and margin are not interchangeable.
Check margin before discounting
A discount comes directly out of gross profit. If a product sells for $100 with $40 cost, a 20% discount changes gross profit from $60 to $40 — a one-third drop in gross profit, not a small tweak.
Common mistakes
- Confusing margin with markup. A 50% markup does not mean a 50% margin.
- Leaving out variable costs like payment processing, packaging, marketplace fees, shipping, returns, or contractor labor.
- Using margin as net profit. Gross margin is before rent, salaries, software, taxes, debt payments, and other overhead.
- Discounting from revenue alone instead of checking how much gross profit remains after the discount.
Frequently asked questions
What is a good profit margin for a small business?+
It depends on your industry, overhead, and goals. Many healthy small businesses target 30–50% gross margin after variable costs but before fixed overhead. Service businesses often run higher (50–70%) because their "cost" is mostly time. Retail and product businesses frequently run lower (20–40%) because of inventory and fulfillment costs. Use the calculator to model your actual numbers rather than chasing an arbitrary benchmark.
Should I use margin or markup when pricing?+
Use markup when you start from your known cost and want a simple rule ("I always add 100% markup"). Use margin when you care about what percentage of revenue you actually keep. The two are mathematically related but not interchangeable. Always check the final margin number before quoting.
Does this include sales tax?+
No. This calculator works on pre-tax amounts. Use the Sales Tax Calculator after you have your final price if you need to add tax for the customer.