How to Calculate Profit Margin
This calculator is for business profit margin - your profit expressed as a percentage of revenue. If you're looking for margin trading (borrowing from a broker to buy stocks or forex), that's a different concept and requires a different calculator.
Gross profit margin shows how much of every dollar of revenue you keep as profit after paying for the cost of producing what you sell. It's the most common margin metric for small businesses and the one this calculator computes.
Profit = Revenue - Cost
Cost = Revenue - Profit
Margin = Profit ÷ Revenue × 100%
For a product that costs $60 to make and sells for $100:
- Profit = $100 - $60 = $40
- Margin = $40 ÷ $100 × 100% = 40%
There are three common ways to measure margin, and this calculator shows the first one:
Gross profit margin = (Revenue - COGS) ÷ Revenue × 100%
Operating margin = Operating Income ÷ Revenue × 100%
Net profit margin = Net Income ÷ Revenue × 100%
The difference is what you subtract from revenue. Gross margin deducts only the direct cost of goods sold (COGS). Operating margin also deducts day-to-day operating expenses like rent, salaries, and marketing. Net margin goes further and deducts everything - interest payments, taxes, and one-time items - to show what's actually left at the bottom of the income statement.
Margin vs. Markup
Margin and markup describe the same profit from two different angles. Margin is profit as a percentage of revenue (selling price); markup is profit as a percentage of cost. The same $20 profit on a $100 sale represents a 20% margin but a 25% markup - different numbers, same transaction.
In practice, pricing decisions often use markup ("add 25% to cost"), while profitability analysis uses margin ("we run at 20%"). That's why this calculator displays both values side by side in the results - you can switch between the two perspectives without doing the math.
If you know one, you can always derive the other:
Markup = Margin ÷ (1 - Margin)
Margin = Markup ÷ (1 + Markup)
For quick reference, here are common conversions. One-third margin (33.33%) is exactly equivalent to 50% markup - a useful benchmark.
| Margin |
Markup |
| 10% |
11.11% |
| 15% |
17.65% |
| 20% |
25% |
| 25% |
33.33% |
| 33.33% |
49.99% |
| 50% |
100% |
| 75% |
300% |
Frequently Asked Questions
How do I calculate a 10%, 20%, or 30% margin?
A target margin tells you how much profit you want relative to revenue. To find the selling price you need to charge, divide your cost by (1 - margin/100). For a $60 cost: at 10% margin you'd charge $66.67, at 20% margin $75, and at 30% margin $85.71. The calculator above does this instantly - enter your cost, set the margin, and read the revenue.
Are margin and profit the same?
No. Profit is a dollar amount - the money left after subtracting cost from revenue. Margin is a percentage - that same profit expressed as a share of revenue. A $40 profit on a $100 sale gives a 40% margin; the same $40 profit on a $200 sale gives only a 20% margin. Profit tells you how much you earned; margin tells you how efficiently.
Why does this calculator show both Margin and Markup?
Margin and markup describe the same profit from different angles - margin is profit as a percentage of revenue, markup is profit as a percentage of cost. The same $20 profit on a $100 sale is a 20% margin but a 25% markup. We show both because pricing decisions often use markup ("add 25% to cost"), while profitability analysis uses margin ("we run at 20% margin"). See the Margin vs. Markup section above for the full conversion table.
Can profit margin be negative?
Yes. If your cost exceeds your revenue, you have a loss instead of a profit, and the margin becomes negative. Selling an item that cost $80 for $60 produces a $20 loss and a margin of -33.33%. A negative margin is a clear signal that pricing or costs need to change - you're losing money on every sale. Some businesses accept short-term negative margins for strategic reasons (introductory pricing, clearance, customer acquisition), but it isn't a sustainable state.
What is a good profit margin?
There is no single "good" margin - it depends heavily on the industry. According to research data from NYU Stern (Aswath Damodaran's Margins by Sector dataset, January 2026), gross margins across US industries range from about 10% in low-margin sectors like Auto & Truck and Farming to over 70% in Pharmaceuticals and Cable TV. For example, Apparel runs around 57%, Building Materials around 31%, and Air Transport around 25%. A useful rule of thumb: compare your margin to others in your specific industry rather than to a universal benchmark. A 20% margin would be excellent for an auto parts business but below average for a software company.
How does discount affect margin?
A discount lowers the selling price, which reduces both your profit and your margin - assuming your cost stays the same. If you sell an item that costs $60 for $100, your margin is 40%. Offering a 15% discount drops the price to $85, your profit falls from $40 to $25, and your margin drops to 29.4%. To see the discounted price first and then recalculate margin, use the Discount Calculator and bring the result back here.
Other money-related calculators on Calculator-1.com:
- Markup Calculator - work out the selling price from cost and markup percentage (or any two of cost, markup, selling price, profit).
- Discount Calculator - calculate the sale price, savings, or discount amount from any two of the four values.
- Percent Off Calculator - find the final price when an item is marked a specific percent off the original.
- Tip Calculator - calculate the tip amount, total bill, and per-person split for any service percentage.
- Money Counter - count physical cash by entering the quantity of each banknote and coin denomination. Supports 10 currencies.
Disclaimer
This calculator and the information above are provided for general guidance only and do not constitute financial advice. Margin benchmarks vary by industry, business size, and stage - the percentages and examples described reflect typical values but are not rules. Statistics cited from NYU Stern (Damodaran's Margins by Sector dataset) represent industry aggregates at the time of publication; specific situations may differ.
The calculator processes your data locally in your browser - cost, revenue, margin, and profit values are not transmitted to our servers. Any saved results stay on your device.
