Business Profit & Margin Calculator
Calculate gross profit, margin percentages, and markups instantly.
Understanding Business Profitability Metrics
For any business owner or entrepreneur, understanding the relationship between cost, price, and profit is fundamental to long-term success. This business calculator helps you break down your unit economics to ensure your pricing strategy is sustainable.
Gross Profit vs. Gross Margin
Gross Profit is the absolute dollar amount you earn after subtracting the Cost of Goods Sold (COGS) from your Selling Price. It represents the money available to cover operating expenses and net income.
Gross Margin is the percentage of the selling price that is profit. It is calculated as (Gross Profit / Selling Price) * 100. This is a critical efficiency metric that investors and lenders use to evaluate business health.
Markup Explained
While often confused with margin, Markup is the percentage added to the cost to reach the selling price. It is calculated as (Gross Profit / Cost) * 100. If an item costs $100 and you sell it for $150, your markup is 50%, but your margin is only 33.3%.
Real-World Example
Suppose you run a retail store and purchase a widget for $60.00. To cover your rent and staff, you decide to sell it for $100.00.
- Gross Profit: $100.00 – $60.00 = $40.00
- Gross Margin: ($40.00 / $100.00) = 40%
- Markup: ($40.00 / $60.00) = 66.67%
Why These Numbers Matter
Tracking these metrics allows you to make informed decisions about discounting, bulk purchasing, and competitive positioning. If your margin is too low, you may not be able to cover fixed costs like marketing or administrative overhead, even if your sales volume is high.