Profit Margin Calculator
Calculate your profit margin percentage, profit amount, and the equivalent markup. Perfect for pricing products to ensure you hit your target profit.
Profit Breakdown
Profit Margin Calculator
Our Profit Margin Calculator helps you determine the percentage of profit you make on each sale. Unlike markup, which is calculated on cost, profit margin is calculated on the selling price. Enter your cost price and selling price to see your margin, or enter a target margin to find the required selling price.
How to Use This Calculator
- Select your mode: Choose “I know Cost and Selling Price” to find your current margin, or “I know Cost and Target Margin” to calculate the price you need to charge.
- Enter your Cost Price: The total amount it costs you to acquire or produce one unit.
- Enter your Selling Price or Target Margin: Either the price you plan to sell at, or the percentage profit you want to achieve.
- Click Calculate: See your profit amount, margin percentage, and the equivalent markup.
What is Profit Margin?
Profit margin is the percentage of the selling price that represents profit. It is calculated by dividing the profit amount by the selling price.
Specifically, this calculator calculates the margin based on the selling price and the product or unit cost you enter. It looks at profit on a per-unit basis, before other business overheads such as rent, salaries, tax and other operating expenses. The result is therefore a gross, per-unit margin – it is not necessarily the same as your business’s overall net profit margin.
For example, if you buy an item for £80 and sell it for £100:
- Your profit is £20.
- Your profit margin is 20% (£20 ÷ £100).
Profit Margin vs. Markup
Many businesses confuse profit margin with markup. They are related but calculated differently:
- Profit Margin is based on the selling price. It tells you how much of every pound of revenue is profit.
- Markup is based on the cost price. It tells you how much you increased the price relative to the cost.
In the example above (£80 cost, £100 sell):
- Margin = 20%
- Markup = 25% (£20 ÷ £80)
This calculator shows both figures to help you avoid pricing errors.
Why Profit Margin Matters
Profit margin is the standard metric used by retailers and analysts to assess business health. It allows you to compare profitability across products with different price points. A high margin means you retain more of every sale after covering costs, giving you more buffer for overheads and taxes.
Frequently Asked Questions
What is the difference between margin and markup?
Margin is calculated as a percentage of the selling price (Profit ÷ Selling Price). Markup is calculated as a percentage of the cost price (Profit ÷ Cost Price). Because the denominator is different, a 20% margin is not the same as a 20% markup.
How do I calculate the selling price for a target margin?
To find the selling price needed to achieve a specific margin, divide your cost price by (1 minus the target margin percentage). For example, to get a 20% margin on a £80 item: Price = £80 / (1 – 0.20) = £80 / 0.80 = £100.
Is a higher profit margin always better?
Generally, yes, as it indicates more efficiency. However, very high margins might indicate your prices are too high compared to competitors, potentially reducing sales volume. The ideal margin depends on your industry and business model.
Can profit margin be negative?
Yes. If your selling price is lower than your cost price, you make a loss on each sale and your profit margin will be negative. Rather than blocking the calculation, this calculator shows the negative profit, margin and markup so you can see exactly how much you are losing per unit.
Does this calculator show my business’s overall net profit margin?
No. This calculator works out the margin on a single product or unit, based on the selling price and the product cost you enter. It does not include business overheads such as rent, salaries, tax and other operating expenses, so the result is a gross, per-unit margin rather than your business’s overall net profit margin.