Profit margin calculator
Profit margin answers: what share of the sale price is gross profit? Markup answers a different question: what percent did you add on top of cost? They are not the same number.
With cost $70, sale price $100, and a 35% target margin:
- Gross profit: $30.00
- Profit margin: 30.00%
- Markup on cost: 42.86%
- Price for 35% target: $107.69
- Profit at 35% target: $37.69
Formulas
Margin (%) = ((Sale price − Cost) / Sale price) × 100
Markup (%) = ((Sale price − Cost) / Cost) × 100
Recommended price = Cost / (1 − Target margin / 100)
Gross profit = Sale price − Cost
Margin is calculated on price. Markup is calculated on cost. A 30% markup produces a 23.08% margin, not 30%.
Step-by-step example (defaults)
- Cost = $70
- Sale price = $100
- Gross profit = 100 − 70 = $30
- Margin = 30 / 100 × 100 = 30%
- Markup = 30 / 70 × 100 = 42.86%
- 35% target → price = 70 / (1 − 0.35) = $107.69
Scenario table (same engine logic)
Values rounded to 2 decimals like the calculator.
| Cost | Sale price | Target % | Profit | Margin | Markup | Target price |
|---|---|---|---|---|---|---|
| $70 | $100 | 35 | $30.00 | 30.00% | 42.86% | $107.69 |
| $50 | $80 | 30 | $30.00 | 37.50% | 60.00% | $71.43 |
| $100 | $150 | 40 | $50.00 | 33.33% | 50.00% | $166.67 |
| $200 | $250 | 25 | $50.00 | 20.00% | 25.00% | $266.67 |
| $1,000 | $1,300 | 30 | $300.00 | 23.08% | 30.00% | $1,428.57 |
| $80 | $80 | 20 | $0.00 | 0.00% | 0.00% | $100.00 |
Markup vs margin (equivalents)
If you mark up cost by a percent, real margin on price is lower.
| Markup on cost | Real margin on price | Example (cost $100) |
|---|---|---|
| 25% | 20.00% | Sell at $125 |
| 30% | 23.08% | Sell at $130 |
| 42.86% | 30.00% | Sell at $142.86 |
| 50% | 33.33% | Sell at $150 |
| 100% | 50.00% | Sell at $200 |
Discounts and minimum margin
If your current margin is 30% ($70 → $100) and you discount the $100 price:
| Discount | Final price | Profit | Resulting margin |
|---|---|---|---|
| 0% | $100.00 | $30.00 | 30.00% |
| 5% | $95.00 | $25.00 | 26.32% |
| 10% | $90.00 | $20.00 | 22.22% |
| 15% | $85.00 | $15.00 | 17.65% |
| 30% | $70.00 | $0.00 | 0.00% |
When to use it
- Before publishing prices in a store or ecommerce catalog.
- To check whether a discount still leaves profit.
- To compare suppliers with different costs.
- Alongside sale price with margin and VAT, Guatemala VAT, break-even, ROI, and business profitability.
Common mistakes
- Calculating the percentage on cost and calling it margin.
- Forgetting card fees, shipping, packaging, or marketplace commissions.
- Pricing only from competitors without checking gross profit.
- Applying discounts without knowing the minimum acceptable margin.
FAQ
Margin measures profit as a percentage of sale price. Markup measures profit as a percentage of cost. With cost $70 and sale $100, margin is 30% and markup is 42.86%.
Divide cost by 1 minus the target margin. With a 35% target and cost $70: 70 / 0.65 = $107.69.
Yes. If the sale price is lower than cost, the calculator shows a loss and a negative margin. That can make sense for one-time clearance, but not as a permanent price.
It depends on the industry. High-volume products may work with lower margins, while services, specialized products, or slower-moving inventory often need higher margins. Use the scenario table to test your target.
For consumer prices, taxes are often included in the displayed price. For profitability, separate tax, cost, and real gross profit—and use the sale-price-with-VAT tool when needed.
Negotiate better cost, reduce waste, packaging, or fees, increase average order value, sell bundles, or limit discounts.
The denominator changes. A 30% markup on $100 cost yields a $130 price; $30 profit on $130 is a 23.08% margin, not 30%.