Free tool
Profit margin calculator
Enter a cost and a selling price to get gross profit, gross margin and markup, or enter a target margin to get the price you need to charge. The formulas and a worked example are below.
Calculate your margin
What the item or service costs you, before tax.
What you charge, before sales tax or GST/HST.
- Gross profit
- $40.00
- Gross margin
- 40.00%
- Markup
- 66.67%
Amounts are calculated in exact cents and percentages rounded to two decimal places. Works for USD or CAD; nothing you type leaves your browser.
The formulas
| Measure | Formula | Example: cost $60, price $100 |
|---|---|---|
| Gross profit | Selling price − cost | $100 − $60 = $40 |
| Gross margin | Gross profit ÷ selling price × 100 | $40 ÷ $100 × 100 = 40% |
| Markup | Gross profit ÷ cost × 100 | $40 ÷ $60 × 100 = 66.67% |
| Price for a target margin | Cost ÷ (1 − target margin) | $60 ÷ (1 − 0.40) = $100 |
Margin and markup are not the same
Margin divides profit by the selling price; markup divides it by the cost. The same $40 profit on a $60 cost is a 40% margin but a 66.67% markup. Mixing them up is a common pricing mistake: adding a 40% markup to a $60 cost gives $84, a margin of only 28.57%.
Margin can never reach 100%, because that would need a cost of zero. Markup has no upper limit. A negative margin means the price is below cost.
Gross margin versus net margin
This calculator works out gross margin, which only subtracts the direct cost of what you sold. Net profit margin also subtracts operating expenses, interest and taxes: net income ÷ revenue × 100.
For the business as a whole, both come from the income statement: revenue and cost of goods sold give gross margin, and net income gives net margin. Prices entered here should exclude sales tax and GST/HST, which you collect on behalf of the government rather than earn.
Want margins straight from your books?
Finovra's income statement shows revenue, costs and net income by account for any date range.
Last reviewed against the product on .