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Profit margin calculator

Enter what something costs you and what you sell it for. See the profit on each sale, your margin, and the markup that matches it.

Published

$

Materials, the goods you buy, and direct labor for one sale.

$
sales

Profit margin

0%

$0 profit on each sale

Markup

0%

Profit as a share of cost

Profit a month

$0

Before overheads

What is profit margin?

Profit margin is the share of the price that you keep after the cost of what you sold. If you sell a product for $100 and it cost you $40, you keep $60, so your margin is 60%. This is your gross margin: it does not yet take off rent, software, insurance and other running costs.

The formula

Margin = (price − cost) ÷ price. The profit is divided by the price. That is the one difference from markup, which divides the same profit by the cost.

Gross margin and net margin

Gross margin looks at one sale. Net margin looks at the whole business: total income minus all expenses, divided by total income. A business can have a high gross margin and still lose money if its overheads are too big. Your profit and loss report shows both.

What is a good margin?

It depends on the work. Services and software often keep 50% to 80%, because there is little direct cost. Retail and food are often 20% to 50%. Compare yourself with businesses like yours and, most of all, with your own numbers last year.

Know your real costs

A margin is only right when the cost is right. If your books are up to date, you can see your actual cost of goods and your net margin every month. Righto, the free accounting app for Mac, builds your profit and loss report from your bank statements.

Frequently asked questions

How do I work out profit margin?

Take the price, subtract the cost, and divide the result by the price. A $100 sale that cost $40 has a $60 profit and a 60% margin.

Is margin the same as markup?

No. Margin divides the profit by the price; markup divides it by the cost. A $40 item sold for $100 has a 60% margin and a 150% markup. See the markup calculator.

Can a margin be more than 100%?

No. Even with a cost of zero, the most you can keep is the whole price, which is 100%. A markup can be more than 100%.

What goes into the cost?

The direct cost of the thing you sold: the goods you bought, materials, and labor or contractors for that job. Rent, software and other running costs are overheads; they come out later, in net profit.

What is a negative margin?

You sell for less than it costs you, so every sale loses money. Raise the price, lower the cost, or stop selling that item.

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