Margin Calculator

1. Enter the cost per unit, what the item costs you to make or buy.
2. Enter the selling price, what the customer pays.
3. Optionally add a target margin to benchmark your result, then read the gross margin, profit, markup and how you compare to target.

Here is what each result means:

Gross margin is the percentage of a sale you keep as profit after paying for the product itself. It is one of the clearest signals of whether a price is healthy, because it measures profit against the price the customer actually pays.

It helps anyone who sets prices: retailers, wholesalers, freelancers and makers. Unlike markup, gross margin can never exceed 100 percent, which makes it a reliable way to compare products, price tiers and whole businesses on one scale. It does not include overheads or tax, so it is a pricing signal, not net profit.

Subtract the cost from the selling price to get the profit, divide that by the selling price, then multiply by 100.

1. Profit = Price - Cost.
2. Divide profit by the selling price.
3. Multiply by 100 for the margin percentage.

Suppose an item costs you $40 and you sell it for $50, with a target margin of 25%.

Calculation: profit = 50 - 40 = $10. Margin = 10 / 50 x 100 = 20%. Markup = 10 / 40 x 100 = 25%. Against a 25% target, you are 5 points short.

This tells you the price is a little low for your goal: to hit a 25% margin on a $40 cost you would price at about $53.33.

Cost Changes

When supplier or material costs rise, margin falls unless you raise the price. Re-run the numbers whenever costs move.

Discounts and Price Cuts

A discount comes straight off margin, not markup. A 10 percent price cut can wipe out a large share of a thin margin, which the discount calculator makes visible.

Hidden Costs

Shipping, fees and returns reduce your true margin below the gross figure. Fold them into cost for a realistic number, and check the wider picture with a cash flow calculator.

Margin and markup describe the same profit from two directions, and mixing them up is the most common pricing error.

A 25 percent markup equals a 20 percent margin. If you price up from cost, the markup calculator starts from a markup percentage and returns the price.

Pricing a New Product

Set the price so the margin covers overheads and leaves a net profit, not just beats cost.

Checking a Deal or Quote

Before you agree a bulk price, confirm the margin still clears your target after the discount.

Comparing Product Lines

Margin puts products of different prices on the same scale, so you can see which lines actually make money. Pair it with the hourly cost calculator when your own time is part of the cost.

1. Confusing Margin with Markup

A 50 percent markup is only a 33 percent margin. Quoting the wrong one overstates profit.

2. Forgetting Overheads and Tax

Gross margin ignores rent, wages and tax, so a healthy gross margin can still mean a net loss.

3. Discounting Without Checking Margin

A price cut reduces margin faster than it reduces markup. Always re-check after a discount.

4. Leaving Out Shipping and Fees

Payment fees, shipping and returns quietly erode margin. Include them in cost.

5. Setting One Target for Every Product

Different lines carry different costs and competition, so a single target margin rarely fits all of them.

The calculator is exact for the arithmetic; its usefulness depends on the costs and price you feed it.

It varies by industry. Grocery and hardware often run under 25 percent, while software and jewellery can exceed 70 percent. Compare against typical figures for your own sector rather than a single benchmark.

Margin is profit as a percentage of the selling price, so it caps at 100 percent. Markup is profit as a percentage of the cost, so it can be well above 100 percent. A 50 percent margin equals a 100 percent markup.

Divide the margin by one minus the margin. A 20 percent margin is a 25 percent markup; a 50 percent margin is a 100 percent markup. The calculator shows both figures at once.

No. Gross margin only accounts for the direct cost of the product. It does not subtract overheads, wages, shipping or tax, so your net margin will be lower.

Use a figure that covers your overheads and leaves a net profit, based on your industry. Many retailers aim for 30 to 50 percent gross margin, but low-overhead or premium businesses differ widely.

Yes. If the selling price is below cost, the margin is negative, meaning you lose money on each sale. The calculator shows this with a minus sign.

Most differences come from confusing margin with markup, or from including or excluding costs such as shipping and fees. Check that both tools use profit over price for margin.

Gross margin is one type of profit margin that uses only product cost. Net profit margin also subtracts overheads and tax, so it is lower. See the profit calculator for the fuller picture.

No. The calculation runs entirely in your browser and nothing you enter is stored or sent anywhere.

• Gross margin: definition and formula (Corporate Finance Institute).
• The difference between markup and margin (Corporate Finance Institute).
• Managing small-business finances (U.S. Small Business Administration).