Which should I use: margin or markup?

Use margin for financial analysis and comparing profitability across products or companies. Use markup for quick pricing decisions in retail. Both are valid — just be consistent and know which one you're using!

What is a good profit margin?

It varies by industry. Software companies target 70-90%, while grocery stores operate on 1-3%. Generally, 20-40% is healthy for most retail/service businesses. Compare to your industry average and ensure you cover all operating expenses with room for profit.

How do I calculate selling price from desired margin?

Use the formula: Selling Price = Cost / (1 - Margin%). Example: $50 cost, want 40% margin. Price = $50 / (1 - 0.40) = $50 / 0.60 = $83.33. Verify: ($83.33 - $50) / $83.33 = 40% ✓

Can margin be over 100%?

No. Margin maxes out at just under 100% (when cost approaches $0). Markup, however, can exceed 100% easily. Example: Buy for $30, sell for $100 = 70% margin or 233% markup.

What's gross margin vs net margin?

Gross margin = (Revenue - COGS) / Revenue. It only accounts for direct product costs. Net margin = (Revenue - All Expenses) / Revenue. It accounts for COGS plus operating expenses (rent, salaries, etc.). Net margin is always lower than gross margin.

Margin Calculator - Profit Margin & Markup Calculator for Business

Calculate profit margin, markup percentage, and optimal selling prices. Understand margin vs markup and set profitable prices for your business.

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Calculator

Cost / Cost of Goods Sold (COGS)What does it cost you to produce or purchase?

$0.01$1000000

Revenue / Selling PriceWhat do you sell it for?

$0.01$1000000

Results

Gross Profit

$0.00

Gross Profit Margin

0.0%

Markup Percentage

0.0%

Margin from Markup (Conversion)

0.0%

Markup from Margin (Conversion)

0.0%

Cost vs Revenue Breakdown

Cost (COGS)$50.00

Revenue (Selling Price)$100.00

What is Profit Margin?

Profit margin measures profit as a percentage of the selling price (revenue). Formula: (Revenue - Cost) / Revenue × 100. For example, if you sell a product for $100 that costs $60, your margin is ($100 - $60) / $100 = 40%. Margin is the standard metric used by accountants and financial analysts to measure profitability.

What is Markup?

Markup measures profit as a percentage of the cost. Formula: (Revenue - Cost) / Cost × 100. Using the same example (sell for $100, cost $60), your markup is ($100 - $60) / $60 = 66.7%. Markup is commonly used by retailers and resellers for pricing decisions because it's easier to calculate selling prices.

Why Margin and Markup Are Different

A 50% margin does NOT equal a 50% markup! They measure the same profit differently. 50% margin means profit is 50% of revenue. 50% markup means profit is 50% of cost. Example: $50 cost, $100 revenue = $50 profit. Margin: $50/$100 = 50%. Markup: $50/$50 = 100%. Same dollar profit, different percentages.

Common Pricing Mistake

❌ WRONG: 'I want 40% margin, so I'll add 40% to my $50 cost = $70.' This gives you only 28.6% margin, not 40%! ✅ CORRECT: For 40% margin, use Cost / (1 - 0.40) = $50 / 0.60 = $83.33. Now $83.33 - $50 = $33.33 profit, which is exactly 40% of $83.33.

Industry Margin Benchmarks

Grocery stores: 1-3% • Restaurants: 3-5% • Retail clothing: 4-13% • Software (SaaS): 70-90% • Jewelry: 25-75% • Furniture: 30-50% • Construction: 10-20% • Consulting: 50-70%. Compare your margin to industry standards to ensure competitive pricing while maintaining profitability.

Margin to Markup Conversion

Quick conversions: 20% margin = 25% markup • 25% margin = 33% markup • 30% margin = 43% markup • 40% margin = 67% markup • 50% margin = 100% markup • 60% margin = 150% markup • 75% margin = 300% markup. The formula: Markup = Margin / (100 - Margin) × 100.

Cost-Plus Pricing Strategy

Cost-plus pricing adds a fixed markup to your cost. It's simple but may not maximize profit. Example: $50 cost + 100% markup = $100 price. Pro: Easy to calculate. Con: Ignores what customers will actually pay. Best for: Commodities, wholesale, construction contracts where costs vary.

Don't Forget Operating Expenses

Gross margin only accounts for direct product costs (COGS). You still need to pay rent, salaries, utilities, marketing, etc. Calculate net margin: Gross Profit - Operating Expenses. Example: 60% gross margin looks great, but after $50K/month overhead, your net margin might only be 10%. Always factor in total business costs.

Sources & References

Investopedia - Profit Margin

https://www.investopedia.com/terms/p/profitmargin.asp

Harvard Business Review - Pricing Strategy

https://hbr.org/topic/pricing

QuickBooks - Markup vs Margin

https://quickbooks.intuit.com/r/pricing-strategy/how-to-calculate-markup-and-margin/

Frequently Asked Questions

Common questions about the Margin Calculator - Profit Margin & Markup Calculator for Business

Margin measures profit as a percentage of revenue (selling price). Markup measures profit as a percentage of cost. They measure the same dollar profit but use different denominators. A 50% margin equals a 100% markup on the same transaction.

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⚠️ Important Disclaimer

This Margin Calculator - Profit Margin & Markup Calculator for Business provides estimates for educational and informational purposes only. Actual results may vary significantly based on individual circumstances, market conditions, regulatory changes, and other factors beyond the scope of this calculator.

The calculations and projections provided are based on assumptions and historical data that may not reflect future performance.Past performance does not guarantee future results.

This tool is not financial advice, tax advice, legal advice, or investment advice. For personalized guidance tailored to your specific situation, please consult with qualified professionals including:

Certified Financial Planner (CFP)
Certified Public Accountant (CPA) for tax matters
Licensed attorney for legal matters
Registered Investment Advisor (RIA) for investment decisions

Data Accuracy: All data sources, statistics, and rates were verified as accurate as of October 2025. Tax rates, market conditions, and other financial data change over time. Always verify current rates and consult official sources.

No Warranties: While we strive for accuracy, we make no warranties or guarantees regarding the accuracy, completeness, or reliability of any information provided. Use this tool at your own risk.