Ask ten small business owners for their profit margin and at least three will quote you their markup instead. The distinction matters: margin is profit as a share of the selling price, markup is profit as a share of cost, and pricing decisions made on the wrong one quietly bleed money. This calculator takes your revenue (or selling price) and cost and returns all three numbers at once — gross profit in dollars, margin percentage and markup percentage — so you can price, quote and negotiate with the right figure. It works for a single product, a service job, or a whole period's revenue and cost of goods sold.
The formulas
Example
Product costs $60, sells for $100. Gross profit is $40. Margin is 40% ($40 ÷ $100). Markup is 66.7% ($40 ÷ $60). Same $40, two very different percentages.
The classic mix-up
"I want a 40% margin" does not mean adding 40% to cost — that gives a 28.6% margin ($40 ÷ $140). To get a true 40% margin on a $60 cost, the price must be $100 (cost ÷ (1 − margin)). Markup is always higher than margin on the same numbers, and the gap widens as margins grow: a 50% markup is only a 33.3% margin.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit divided by selling price; markup is profit divided by cost. A $40 profit on a $100 sale is a 40% margin but a 66.7% markup on the $60 cost.
What is a good profit margin?
It depends on the industry. Retail often runs 2–5% net margins, restaurants 3–9%, software 20%+. Compare against your industry, not a universal number.
How do I price for a target margin?
Price = cost ÷ (1 − target margin). For a 40% margin on $60 cost: $60 ÷ 0.60 = $100.
Gross margin vs net margin?
Gross margin uses revenue minus cost of goods sold. Net margin subtracts everything — rent, salaries, taxes — and is always lower.