Quickly determine your profit margins and markup percentages.
Gross Profit:
Gross Margin:
Markup Percentage:
How Do You Calculate a Margin?
In business, the margin (specifically gross margin) represents the portion of your sales revenue that remains after accounting for the direct costs of producing your goods or services. It is a critical metric for understanding your company's financial health and pricing strategy.
It is common to confuse margin with markup, but they represent different perspectives of the same transaction:
Margin is the profit as a percentage of the selling price.
Markup is the amount added to the cost price to reach the selling price.
Step-by-Step Calculation Guide
Follow these three steps to calculate your margin manually:
Find Gross Profit: Subtract the Cost of Goods Sold (COGS) from your Total Revenue. (Profit = Revenue – Cost).
Divide by Revenue: Take your Gross Profit and divide it by the Total Revenue figure.
Convert to Percentage: Multiply the result by 100 to get your Margin percentage.
Practical Example
Suppose you sell a handcrafted table for $500. The wood, hardware, and labor costs to build it total $300.
Metric
Calculation
Result
Gross Profit
$500 – $300
$200
Gross Margin
($200 / $500) * 100
40%
Markup
($200 / $300) * 100
66.7%
Why Monitoring Margins is Critical
Understanding your margin helps you determine if your business is sustainable. If your margins are too thin, you may not have enough cash left over to cover operating expenses like rent, marketing, and utilities. High-volume businesses (like grocery stores) often operate on low margins, while luxury brands require high margins to maintain exclusivity and cover high overhead costs.
function calculateMargin() {
var cost = parseFloat(document.getElementById('costInput').value);
var revenue = parseFloat(document.getElementById('revenueInput').value);
var resultBox = document.getElementById('resultDisplay');
if (isNaN(cost) || isNaN(revenue)) {
alert("Please enter valid numbers for both Cost and Revenue.");
return;
}
if (revenue === 0) {
alert("Revenue cannot be zero for margin calculations.");
return;
}
var profit = revenue – cost;
var margin = (profit / revenue) * 100;
var markup = (cost !== 0) ? (profit / cost) * 100 : 0;
document.getElementById('grossProfit').innerHTML = "$" + profit.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('grossMargin').innerHTML = margin.toFixed(2) + "%";
document.getElementById('markupPercent').innerHTML = (cost !== 0) ? markup.toFixed(2) + "%" : "N/A";
resultBox.style.display = 'block';
}