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Profit Margin Calculator

Calculate profit margin, markup and selling price.

I know
$

What the item costs you to buy or make.

$

Profit margin

–

Selling price
Profit per item
Markup
Cost

Results are estimates for general information only and are not financial advice. Check important figures with a qualified professional or your lender. Read our disclaimer.

When to use it

Use this calculator when you are pricing a product or checking whether a sale is worth it. It works out profit margin, markup and profit per item from whichever numbers you already know. Shop owners, freelancers and online sellers use it to set prices that cover costs and leave a healthy profit.

How to use it

  1. Choose your Currency.
  2. Under I know, pick one of three options:
    • Cost and price if you already have a selling price.
    • Cost and target margin to find the price that gives a set margin.
    • Cost and markup to find the price after adding a markup.
  3. Enter the Cost, what the item costs you to buy or make.
  4. Enter the Selling price, Target profit margin or Markup, depending on your choice.
  5. Read the Profit margin, Selling price, Profit per item, Markup and Cost.

Worked example

You buy a lamp for $40 and sell it for $65. The profit per item is $25. The profit margin is 38.46%, because $25 is 38.46% of $65. The markup is 62.5%, because $25 is 62.5% of the $40 cost.

Now say you want a 35% margin. Switch to Cost and target margin and enter 35. The tool tells you to charge $61.54, which gives a profit of $21.54.

If you prefer to add a 50% markup instead, choose Cost and markup. The price becomes $60, and the margin works out at 33.33%.

Tips

  • Decide which number you mean. Suppliers and shops often talk about markup, while accountants talk about margin. Mixing them up is the most common pricing error.
  • Leave room for discounts. If you plan to run 20% off sales, check the margin at the sale price too.
  • Check against fees. Marketplaces and card payments take a cut. Add these to the cost for a true margin.

Quick rule

Margin is always smaller than markup for the same item. A 50% margin needs a 100% markup, which means charging double the cost.

Common mistakes

  • Adding a 30% markup to get a 30% margin. A 30% markup only gives a 23% margin. To get 30% margin, use Cost and target margin.
  • Leaving out shipping. If you offer free delivery, the postage is part of your cost.
  • Using prices that include tax. Remove the tax first with the Sales Tax Calculator, or the margin will look larger than it is.

Frequently asked questions

What is the difference between margin and markup?

Both compare profit, but against different numbers. Margin is profit as a share of the selling price. Markup is profit as a share of the cost. A $40 item sold for $60 has a 50% markup but only a 33.33% margin.

Why can't margin be 100% or more?

Margin is profit divided by the price, and profit can never be larger than the price unless the item cost nothing. Markup has no upper limit, because profit can be many times the cost.

What should I include in the cost?

Everything it takes to get one item to the customer, such as the item itself, packaging, shipping to you and payment fees. If you want your overheads covered too, add a share of them to each item's cost.

Does this include sales tax or VAT?

No. Enter prices without tax. Tax collected from customers is passed on to the government and is not profit.

What is a good profit margin?

It varies by industry. Grocery shops often run on single-digit margins, while software and handmade goods can be much higher. Compare yourself with similar businesses and make sure the margin covers your running costs.

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