Professional Profit Margin Calculator
Calculate gross profit, margin percentage, and markup instantly
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Understanding Profit Margin Calculations
In business, understanding the difference between your costs and your revenue is critical for sustainability. This calculator helps you determine your Gross Profit Margin, which represents the percentage of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold.
The Margin Formula
To calculate margin manually, we use the following formula:
Margin vs. Markup: What is the Difference?
While often used interchangeably, margin and markup are different metrics based on different starting points:
- Margin is the ratio of profit to the selling price. It tells you how much of every dollar in sales you keep.
- Markup is the ratio of profit to the cost price. It tells you how much more you charge than what you paid for the item.
Real-World Example
Imagine you run a retail store and purchase a product for $50 (Cost) and sell it for $100 (Revenue):
- Gross Profit: $100 – $50 = $50
- Margin: ($50 / $100) * 100 = 50%
- Markup: ($50 / $50) * 100 = 100%
High-volume businesses like grocery stores often operate on low margins (1-5%), while luxury goods or software companies may enjoy margins exceeding 70%.