Profit Margin Calculator
Formula
Margin = (Price − Cost) ÷ Price × 100
Profit margin is the percentage of selling price that is profit. If you sell something for $75 that cost $50, your margin is 33.3%.
How to use
- Enter what the item cost you in the Cost field.
- Enter what you charge in the Selling Price field.
- Read your Profit and Margin (%) in the results.
Example
With a Cost of $50 and a Selling Price of $75, profit is $25. Dividing $25 by the $75 price gives a 33.3% margin.
Frequently Asked Questions
What is a good profit margin?
10% is considered average, 20% is good, 30%+ is excellent. It varies greatly by industry.
How do I calculate the selling price I need for a target margin?
Rearrange the margin formula so price equals cost divided by (1 minus the target margin as a decimal). If an item costs $50 and you want a 40% margin, divide 50 by 0.60 to get about $83.33. This is handy when you know your cost and your desired margin but need to set the price.
Is gross margin the same as net profit margin?
No. Gross margin only accounts for the direct cost of the product, which is what this tool calculates. Net profit margin subtracts all other expenses such as rent, salaries, marketing, and taxes, so it is usually much lower than gross margin. A business can have a healthy gross margin and still lose money once overhead is included.