Net Profit
Net Profit Margin
Markup Percentage
Online Profit Margin Calculator
The Profit Margin Calculator helps you quickly find your profit, profit margin, and markup from two numbers: cost and revenue.
Enter what something costs you and how much revenue it generates. The calculator instantly shows how much profit is left, what percentage of revenue that profit represents, and how much the selling price is marked up over cost.
For example, if your cost is $100 and your revenue is $170, your profit is $70, your profit margin is 41.18%, and your markup is 70%.
How to Use the Profit Margin Calculator
Using the calculator only requires two values:
- Enter the Cost – Enter the amount spent to produce, purchase, or deliver the product or service.
- Enter the Revenue – Enter the amount received or expected from the sale.
- Click Calculate – The calculator displays the profit, profit margin, and markup percentage.
- Review the Results – Use the figures to evaluate pricing and profitability.
Use the same currency for both values, such as USD, EUR, GBP, or any other currency. The percentage calculations work the same way regardless of the currency.
Profit Margin Formula
The standard profit margin formula is:
Profit Margin = (Revenue − Cost) ÷ Revenue × 100
The first step is finding the profit:
Profit = Revenue − Cost
Then divide the profit by revenue and multiply by 100.
Example
Suppose a product costs $100 and generates $170 in revenue.
Profit = $170 − $100 = $70
Profit Margin = ($70 ÷ $170) × 100 = 41.18%
So the profit margin is 41.18%.
This means that, based on the costs included in the calculation, $41.18 of every $100 in revenue represents profit.
How Markup Is Calculated
Markup is different from profit margin because it compares profit with cost, not revenue.
The markup formula is:
Markup = (Revenue − Cost) ÷ Cost × 100
Using the same example:
Markup = ($170 − $100) ÷ $100 × 100 = 70%
Therefore:
- Profit: $70
- Profit Margin: 41.18%
- Markup: 70%
A 70% markup does not mean a 70% profit margin. They use different starting points.
Profit Margin vs. Markup
The simplest way to remember the difference is:
Profit Margin: Profit compared with revenue
Markup: Profit compared with cost
For example, with a $100 cost and $170 selling price:
| Calculation | Result |
|---|---|
| Profit | $70 |
| Profit Margin | 41.18% |
| Markup | 70% |
Both measurements are useful, but they answer different pricing questions.
What Does the Calculator Show?
Profit
Profit is the amount left after subtracting cost from revenue.
Profit = Revenue − Cost
A positive result means the revenue is higher than the entered cost. A negative result means the sale results in a loss.
Profit Margin
Profit margin expresses profit as a percentage of revenue.
This makes it easier to compare the profitability of sales with different revenue amounts.
Markup Percentage
Markup shows how much higher the revenue is than the cost, expressed as a percentage of cost.
It is particularly useful when setting a selling price based on a desired increase over cost.
Real-World Example
Imagine you sell an item for $250 and your relevant cost is $150.
Profit:
$250 − $150 = $100
Profit Margin:
($100 ÷ $250) × 100 = 40%
Markup:
($100 ÷ $150) × 100 = 66.67%
The sale therefore produces a $100 profit, a 40% profit margin, and a 66.67% markup.
What Should You Include in Cost?
The answer depends on what you want the calculation to measure.
For a basic product calculation, cost might simply be the purchase or manufacturing cost.
For a more realistic sales calculation, you may also include direct costs such as:
- Materials
- Packaging
- Shipping and fulfillment
- Payment processing fees
- Marketplace fees
- Direct labor
- Other expenses directly related to the sale
For example, an online seller may buy a product for $30 but spend another $8 on packaging, shipping, and transaction fees. In that case, using $38 as the relevant cost can provide a more useful profitability calculation than using only the $30 purchase price.
Profit Margin for E-Commerce
E-commerce businesses often have several costs attached to each order.
Suppose a product sells for $80:
- Product cost: $30
- Packaging: $2
- Shipping: $6
- Payment fees: $3
- Other direct costs: $4
Total cost:
$30 + $2 + $6 + $3 + $4 = $45
Profit:
$80 − $45 = $35
Profit margin:
($35 ÷ $80) × 100 = 43.75%
This calculation gives a clearer picture of the profit from that sale because the relevant direct costs are included.
How to Calculate a Target Selling Price
Sometimes you know your cost and the profit margin you want, but you need to determine the selling price.
Use this formula:
Selling Price = Cost ÷ (1 − Target Margin)
Convert the target percentage to a decimal before using it.
Example
Suppose your cost is $60 and you want a 40% profit margin.
$60 ÷ (1 − 0.40) = $100
So the required selling price is $100.
Check the result:
$100 − $60 = $40 profit
$40 ÷ $100 × 100 = 40%
This is why adding 40% to the cost is not the same as achieving a 40% margin.
A 40% markup on $60 would produce a selling price of $84, but the resulting margin would be only 28.57%.
What Does a 40% Profit Margin Mean?
A 40% profit margin means that profit equals 40% of revenue, based on the costs included in the calculation.
For example, with $1,000 in revenue and a 40% margin:
Profit = $1,000 × 40% = $400
The remaining $600 represents the costs included in that calculation.
Can Profit Margin Be Negative?
Yes. A negative margin occurs when the cost is greater than the revenue.
For example:
- Cost: $120
- Revenue: $100
- Profit: −$20
- Profit Margin: −20%
This indicates a loss rather than a profit.
Can Profit Margin Be 0%?
Yes. A 0% margin occurs when revenue and cost are equal.
For example:
- Cost: $200
- Revenue: $200
- Profit: $0
- Profit Margin: 0%
This is a break-even result based on the figures entered.
Gross Profit Margin vs. Net Profit Margin
Profit margin can refer to different measures depending on which expenses are included.
Gross profit margin generally measures the profit remaining after deducting the cost of goods sold (COGS).
Net profit margin generally measures profit after operating expenses and other applicable expenses have been deducted.
This calculator works directly from the cost and revenue values you enter. Therefore, the result depends on what you include in the cost field.
For example, if you enter only the product purchase cost, the result does not automatically account for advertising, rent, salaries, taxes, software, or other overhead expenses.
For a calculation intended to represent broader net profitability, use a cost figure that includes the expenses you want to account for.
Why Profit Margin Matters
Revenue alone does not tell you how profitable a sale is.
Two products can generate the same revenue while producing very different amounts of profit because their costs may differ.
Profit margin helps put profit into context. You can use it to compare:
- Different products
- Different services
- Different pricing options
- Sales periods
- Customer or sales channels
It can also help identify products that generate plenty of revenue but leave relatively little profit after costs.
Common Profit Margin Mistakes
Confusing margin with markup
A margin uses revenue as the denominator. A markup uses cost.
Using incomplete costs
If important direct costs are left out, the calculated profit may look higher than the amount you actually keep from a sale.
Treating revenue as profit
Revenue is the amount generated by the sale. Profit is what remains after the relevant costs are deducted.
Ignoring changing costs
Supplier prices, shipping rates, payment fees, and other expenses can change. A margin calculated months ago may no longer represent your current situation.
Profit Margin Is Not the Same as Cash Flow
Profit and cash flow measure different things.
A business can be profitable but still experience cash-flow problems if money is tied up in inventory, unpaid invoices, equipment, or other commitments.
The Profit Margin Calculator is useful for evaluating the relationship between cost, revenue, and profit. It is not a substitute for accounting records, financial statements, or cash-flow analysis.
Frequently Asked Questions
1. What is the formula for profit margin?
The formula is:
Profit Margin = (Revenue − Cost) ÷ Revenue × 100
You first calculate the profit and then express it as a percentage of revenue.
2. What is the difference between profit and profit margin?
Profit is the actual dollar amount left after subtracting cost from revenue.
Profit margin expresses that profit as a percentage of revenue.
For example, $50 profit on $200 revenue is a 25% profit margin.
3. Is markup the same as profit margin?
No. Markup is based on cost, while profit margin is based on revenue.
A $100 cost and $150 selling price produce a 50% markup but only a 33.33% profit margin.
4. How do I calculate the selling price for a desired profit margin?
Use:
Selling Price = Cost ÷ (1 − Target Margin)
For example, a $50 cost with a 30% target margin requires a selling price of about $71.43.
5. Can I use this calculator for services?
Yes. The calculator can be used for freelance projects, consulting, repairs, agencies, subscriptions, and other services. Enter the relevant cost of delivering the service and the revenue generated.
6. Should shipping be included in the cost?
Include shipping when it is a cost you want the calculation to account for. For an e-commerce order, including direct fulfillment expenses can make the result more representative of the sale.
7. What happens when the cost is higher than the revenue?
You have a loss. The profit becomes negative and the profit margin will also be negative.
8. Does this calculator account for taxes automatically?
No. The calculator only uses the cost and revenue values you provide. Taxes, fees, and other expenses are not automatically added unless you include them in the cost figure.
9. Is a higher profit margin always better?
Not necessarily. A higher margin can be beneficial, but pricing decisions also depend on sales volume, customer demand, competition, operating expenses, and the overall business model.
10. Can I use this calculator for a whole business?
Yes. You can use total revenue and total relevant costs to calculate an overall margin for a period, provided the figures are measured consistently. For formal financial reporting, use figures from your accounting records.