Profit Margin Calculator
Explain like I'm 5
If you sell lemonade for £1 and the lemons and cups cost 60p, you made 40p profit. That 40p is 40% of your £1 selling price: that's your margin. But it's 66.67% of your 60p cost: that's your markup. Same £1 sale, same 40p profit, two different percentages depending on what you divide by.
Results
- Revenue–
- Cost of goods sold–
- Gross profit–
- Gross margin–
- Markup–
Net profit
- Operating expenses–
- Net profit–
- Net margin–
- Your cost–
- Target margin–
- Selling price needed–
- Profit per unit–
- Equivalent markup–
- Your cost–
- Target markup–
- Selling price needed–
- Profit per unit–
- Equivalent margin–
Show workings
Margin vs markup: why the difference matters
The confusion between margin and markup trips up a lot of businesses when pricing. A 50% markup is not the same as a 50% margin, and getting them confused means you end up charging less than you think you are. If your cost is £100 and you apply a 50% markup, you sell for £150 and your margin is 33.3%. If you want a 50% margin, you need to sell for £200.
The rule is: margins are always lower than the equivalent markup. The gap gets wider as margins get higher.
Gross margin vs net margin
Gross margin removes only the direct costs of producing or buying what you sold: materials, labour directly tied to production, wholesale purchase price. It tells you how much money you have left before you pay for the business itself.
Net margin removes everything else: rent, staff not directly producing, marketing, software subscriptions, professional fees, depreciation. It tells you how much of every pound of revenue actually becomes profit after all the bills are paid. A business can have an excellent gross margin and a weak net margin because its overheads are too high.
What counts as cost of goods sold?
For a product-based business: the wholesale or production cost of each item you sold. For a service business: direct labour (the hours your people spent delivering the project), any materials or tools specific to that project. Overheads like office rent and management salaries are operating expenses, not COGS, and they go in the second field if you want net margin.
Related calculators
Margins feed into the rest of the pricing and planning picture.
Common questions
What is the difference between profit margin and markup?
Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost. If you buy something for £60 and sell it for £100, your margin is 40% (£40 profit on £100 revenue) but your markup is 66.67% (£40 profit on £60 cost). They describe the same profit in different ways: margin from the customer's side, markup from the supplier's side.
What is a good profit margin?
It depends heavily on the industry. Retail typically operates on gross margins of 20–50%. Software and SaaS businesses often achieve gross margins above 70%. Restaurants frequently run at 3–9% net margin despite higher gross margins. The right benchmark is your industry average, not a universal number.
What is gross profit vs net profit?
Gross profit is revenue minus the direct cost of producing or buying what you sell (cost of goods sold). Net profit is gross profit minus operating expenses such as rent, salaries, marketing, and overheads. Gross margin tells you how efficiently you produce; net margin tells you how efficiently you run the whole business.
How do I calculate the price to achieve a target margin?
Use the formula: price = cost ÷ (1 − target margin as a decimal). For example, if your cost is £60 and you want a 40% margin: price = £60 ÷ 0.6 = £100. Use the "Find selling price" mode above to work that out for you.