Profit Margin Calculator
Find your margin, markup and profit from cost and price, or the price to charge for the margin you want. Advanced adds tax, fees, discounts and net margin.
Profit as a share of the price.
Profit as a share of the cost.
Margin is worked out on the price before tax, because the tax goes to the government. Shelf prices in the UK, EU, India and the Gulf usually include VAT or GST; US prices usually don't.
Platform or referral fee: a % of the sale plus any fixed fee per order.
Card or payment processing. Use your provider's own rates.
Shipping, packaging, ads per sale.
Shows the price you'd need to charge.
Fees are worked out on what the customer pays, including any tax, as most marketplaces and card firms do.
Rent, wages, software: costs you pay however much you sell.
Income or corporate tax, for net margin.
Margin and markup table, and what discounts do
| Margin | Markup | Price | Profit |
|---|
| Discount | Price | Profit | Margin | Sell more |
|---|
How your margin is worked out
Margin = profit ÷ price. Markup = profit ÷ cost.
- 1
Profit per item
$100.00 − $60.00= $40.00
- 2
Margin
$40.00 ÷ $100.00= 40%
- 3
Markup
$40.00 ÷ $60.00= 66.67%
- 4
Back to the price
$60.00 ÷ (1 − 0.4)= $100.00
Read more: the formula, a worked example, tax, fees, discounts and net margin
Margin and markup both compare profit with something, but not the same thing. Margin is profit as a share of the selling price. Markup is profit as a share of the cost. The same sale always has a bigger markup than margin, so mixing them up leads to prices that are too low.
The formula
profit = price − cost
margin % = profit ÷ price × 100
markup % = profit ÷ cost × 100
price from margin = cost ÷ (1 − margin ÷ 100)
price from markup = cost × (1 + markup ÷ 100)
markup = margin ÷ (1 − margin) · margin = markup ÷ (1 + markup)
Worked example
You buy an item for 60 and sell it for 100. Profit is 100 − 60 = 40. Margin is 40 ÷ 100 = 40%. Markup is 40 ÷ 60 = 66.67%. Working back, a 40% margin on a cost of 60 means a price of 60 ÷ (1 − 0.40) = 60 ÷ 0.6 = 100.
Margin vs markup: the common mistake
Adding 40% to a cost of 60 gives 84, not 100. That is a 40% markup, and the margin is only 24 ÷ 84 = 28.57%. To get a 40% margin you divide by 0.6 instead. The table above lists matching margins and markups at your cost.
| Margin | Markup |
|---|---|
| 10% | 11.11% |
| 20% | 25% |
| 25% | 33.33% |
| 33.33% | 50% |
| 40% | 66.67% |
| 50% | 100% |
| 60% | 150% |
| 75% | 300% |
Sales tax and VAT
Tax you collect is not yours, so margin is worked out on the price before tax. A price of 120 that includes 20% VAT is 120 ÷ 1.2 = 100 before tax, which is the figure to compare with your cost.
Fees and the price for a target margin
Marketplace and card fees come out of every sale. Say a marketplace takes 15% + 0.30 and payment costs 2.9% + 0.30. On a price of 100 that is 15.30 + 3.20 = 18.50, so the 40 profit falls to 21.50, a margin of 21.5% after fees. To keep 40% after fees you need a price of (60 + 0.30 + 0.30) ÷ (1 − 0.15 − 0.029 − 0.40) = 60.6 ÷ 0.421 = 143.94. These fee rates are only an example; enter your own platform's current rates.
What a discount really costs
A discount comes straight out of profit. 20% off a price of 100 with a cost of 70 (a 30% margin) leaves a price of 80 and a profit of 10, a margin of just 12.5%. Profit per item falls from 30 to 10, so you'd have to sell 3 times as many (200% more) to make the same money. On the 40% example, 20% off means selling twice as many.
Gross, operating and net margin
- Gross margin = (sales − cost of the goods) ÷ sales. This is the margin at the top of the calculator.
- After fees also takes off marketplace, payment and other per-item costs.
- Operating margin also takes off running costs like rent and wages.
- Net margin is what is left after tax on profit too.
Example: 1,000 items at 100 with a cost of 60 bring in 100,000 of sales and 40,000 of gross profit. Take off 15,000 of running costs to get 25,000, then 25% tax (6,250) to leave a net profit of 18,750: a net margin of 18.75%. You break even after 15,000 ÷ 40 = 375 items.
Margins are worked out per item and assume every item sells at the same price and cost. Tax on profit is a flat rate on any profit for the period; real tax rules have allowances and bands, so check with an accountant.
Common questions
How do I calculate profit margin?
Take the cost away from the selling price to get the profit, then divide the profit by the price and multiply by 100. An item that costs 60 and sells for 100 makes 40 profit, which is a 40% margin. Work it out on the price before sales tax or VAT, because the tax isn't yours.
What is the difference between margin and markup?
Margin is profit as a share of the selling price; markup is profit as a share of the cost. Selling something for 100 that costs 60 is a 40% margin but a 66.67% markup. The same sale always has a bigger markup than margin, so mixing them up leads to prices that are too low.
How do I set a price for a target margin?
Divide the cost by 1 minus the margin as a decimal. For a 40% margin on a cost of 60, the price is 60 ÷ 0.6 = 100. Adding 40% to the cost gives only 84, which is a 28.57% margin. That's the most common pricing mistake.
How do discounts affect profit margin?
A discount comes straight out of profit. Taking 20% off a price of 100 with a cost of 70 leaves a price of 80 and a profit of 10, so the margin falls from 30% to 12.5%. You'd have to sell 3 times as many items to make the same money.
What is the difference between gross and net margin?
Gross margin is sales minus the cost of the goods, divided by sales. Operating margin also takes off running costs like rent and wages, and net margin is what's left after tax on profit too. In our example a 40% gross margin becomes an 18.75% net margin after running costs and tax.
Do marketplace fees count in profit margin?
Yes, they come out of every sale. If a marketplace takes 15% + 0.30 and payment costs 2.9% + 0.30, a sale at 100 loses 18.50 in fees, so 40 of profit falls to 21.50, a 21.5% margin. These rates are only an example; enter your own platform's rates.
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Made by Zulu Calculator, part of AlphaZulu LLC. Formulas are shown in full and rule figures are checked against official sources; see how we build calculators.