Profit Margin Calculator

Work out the profit margin and markup on a sale from its cost and selling price, or find the price that gives the margin or markup you want, with an optional break-even point for your fixed costs. Your inputs stay in your browser.

Your product

What do you know?

What one unit costs you to buy or make.

Profit as a share of the selling price.

Profit as a share of the cost.

Rent, salaries and other costs that do not change with sales, to see how many units break even.

40% margin, 66.67% markup. See full results

Example: an item that costs $30.00 and sells for $50.00. Enter your numbers to update.

Your margin and markup

Profit margin
40%
$20.00 profit on a $50.00 sale
Markup
66.67%
Profit ÷ cost
Profit per unit
$20.00
$50.00 − $30.00

How to calculate profit margin and markup

  1. Profit: selling price − cost: $50.00 − $30.00 = $20.00.
  2. Margin: profit ÷ selling price × 100: $20.00 ÷ $50.00 = 40%.
  3. Markup: profit ÷ cost × 100: $20.00 ÷ $30.00 = 66.7%.

Margin and markup describe the same sale from two sides. Margin is measured against the price the customer pays; markup against what the item cost you. Markup is always the larger number for a profitable sale.

How to price for a target margin

Divide the cost by 1 minus the margin as a decimal: $30.00 ÷ (1 − 0.40) = $50.00 for a 40% margin.

A common mistake is to add the margin percentage to the cost as if it were a markup: $30.00 + 40% = $42.00, which is only a 28.6% margin. To earn 40% of the selling price you need a 66.7% markup.

Price = cost ÷ (1 − margin) · Price = cost × (1 + markup)

Markup to margin conversion

Margin = markup ÷ (1 + markup); markup = margin ÷ (1 − margin).

Markup and the profit margin it gives

MarkupMarginPrice for a $100 cost
10% 9.1%$110.00
20% 16.7%$120.00
25% 20%$125.00
30% 23.1%$130.00
40% 28.6%$140.00
50% 33.3%$150.00
60% 37.5%$160.00
75% 42.9%$175.00
100% 50%$200.00
150% 60%$250.00
200% 66.7%$300.00

A 50% margin needs a 100% markup: the price is double the cost.

Break-even point

Your fixed costs, such as rent and salaries, have to be covered before any sale earns a profit. Divide them by the profit on each unit: $5,000.00 ÷ $20.00 = 250 units to break even (U.S. Small Business Administration: break-even point). The SBA calls price minus variable cost per unit the contribution margin; enter the cost of one unit as the variable cost.

Assumptions and limits

  • This is gross margin on one unit: selling price against the cost of the item. Operating costs, taxes and interest are not subtracted, so it is not your net profit margin.
  • Sales tax collected from customers is not part of the selling price for margin purposes.
  • Break-even assumes one product at one price and cost. Several products need a weighted average.

Methodology and testing

Automated tests check hand-worked examples, that pricing for a margin or markup gives back exactly that margin or markup, that the markup and margin conversions invert each other, and break-even rounding. How we build and test calculators.

Sources

  • Break-even point, U.S. Small Business Administration. Break-even point in units = fixed costs ÷ (sales price per unit − variable cost per unit); contribution margin = (sales price per unit − variable cost per unit) ÷ sales price per unit.
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