What is the difference between margin and markup?

Margin is calculated as profit divided by revenue (selling price). Markup is profit divided by cost (cost of goods sold). Margin is always lower than markup, and cannot exceed 100%, whereas markup can be hundreds or thousands of percent.

What is a good profit margin for a business?

A "good" margin depends on the industry. Retail and restaurants often hover around 10-15% net margin, while software companies (SaaS) can regularly exceed 70-80% gross margin. Generally, a gross profit margin of 50% or above is considered healthy for small businesses.

Why is tracking gross margin critical?

Gross margin proves whether your core business model is viable. If your gross margin is negative or too thin, you cannot possibly pay for overhead costs like rent, salaries, marketing, and utilities, regardless of how much volume you sell.

Business Tool

Profit Margin Calculator

Calculate gross profit margin, net profit margin, markup percentage, and total profit based on revenue and cost of goods sold (COGS). Perfect for pricing strategies.

Interactive Profit Margin Calculator Workspace

Live Solver

Total Revenue ($)

Cost of Goods Sold (COGS) ($)

Gross Profit$4,000.00

Gross Margin40.00%

Product Markup66.67%

COGS Ratio60.00%

Assess Price Adjustments

Mathematical Formula & Variables

Equation ModelGross Margin % = ((Revenue - Cost) / Revenue) × 100

Profit margin is the percentage of selling price that is turned into profit. It measures how much out of every dollar of sales a company actually keeps in earnings.

Variable Definitions

Symbol	Description
Gross Margin %	Percentage of revenue that is profit
Revenue	Total sales generated from selling a product or service
Cost	Cost of Goods Sold (COGS), representing direct expenses of production
Net Profit	Absolute profit amount (Revenue - Cost)

How to Use the Profit Margin Calculator

Enter the cost of goods sold (COGS) in the Cost field.
Enter the revenue or total selling price in the Revenue field.
Review the calculated Gross Profit, Gross Profit Margin %, and Markup % instantaneously.
Adjust either parameter to see how changes in cost or selling price impact your profit margins.

Practical Example Calculation

Scenario Context: A retail boutique purchases a designer handbag for $120 and sells it to consumers for $300. Calculate the profit margins.

Step 1: Identify Cost (COGS) = $120, and Revenue = $300.

Step 2: Calculate Gross Profit = Revenue - Cost = $300 - $120 = $180.

Step 3: Calculate Gross Profit Margin % = (Gross Profit / Revenue) × 100 = ($180 / $300) × 100 = 60.00%.

Step 4: Calculate Markup % = (Gross Profit / Cost) × 100 = ($180 / $120) × 100 = 150.00%.

The boutique achieves a 60% gross profit margin with a 150% product markup.

Frequently Asked Questions

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