Profit margin and markup calculator
Enter a product's cost and selling price to see its profit margin, its markup on cost and the profit on each unit. If you already have a target margin or markup in mind, the calculator gives you the price to charge.
Calculator
Result
- Profit margin
- Profit per unit
- Markup on cost
The calculation runs in your browser; the numbers you enter are not sent anywhere.
Profit margin = (price − cost) ÷ price. Markup = (price − cost) ÷ cost. An item bought for 80 and sold for 100 earns 20: that is a 20% margin and a 25% markup.
Margin and markup are not the same number
Both describe the same profit, but they divide it by a different base. Margin divides profit by the selling price; markup divides it by the cost. That is why markup is always the larger of the two for the same item.
When you tell yourself to “add 25% to the supplier price”, you are setting a markup. When you check at month end how much of your sales you actually kept, you are looking at margin. Mixing them up is the most common reason prices end up lower than planned.
| Cost | Price | Margin | Markup |
|---|---|---|---|
| 80 | 100 | 20% | 25% |
| 60 | 100 | 40% | 66.7% |
| 50 | 100 | 50% | 100% |
Pricing from a target margin
To reach a target margin you cannot simply add that percentage on top of cost; you divide the cost by (1 − margin). The calculator uses exactly these formulas:
- Price = cost ÷ (1 − target margin)
- Price = cost × (1 + target markup)
- Markup = margin ÷ (1 − margin); margin = markup ÷ (1 + markup)
Sales tax, discounts and landed cost
Work with amounts before sales tax or VAT. Tax collected on a sale is not your profit, so a calculation on tax-inclusive prices overstates the margin. Rates differ by country and product, which is why the calculator does not ask for one: just enter net amounts.
Add costs that belong to the item, such as freight, packaging or import duty, to the unit cost. If you discount, run the numbers again at the discounted price: a 10% discount on an item with a 20% margin cuts the margin to about 11%.
Practical scenario
Example: a detergent bought for 72
A grocery store buys a detergent for 72 before tax and wants a 25% margin. The price has to be 72 ÷ 0.75 = 96, which leaves 24 of profit per unit and a 33.3% markup. Had the store simply added 25% to cost and charged 90, it would keep only 18 per unit, a 20% margin.
Step-by-Step Implementation
1. Enter the cost
Type the unit cost before tax. Include freight or packaging that you pay specifically for this item.
2. Choose what you already know
If the price is set, read off the margin. If it is not, enter a target margin or markup and take the suggested price. Picking a currency is optional.
3. Put the numbers into GiroPS
Save the selling price on the product and the cost as its purchase price. At period end the Profit & Loss report works out cost of goods sold at weighted average cost and shows the gross margin you actually achieved.
Common Pitfalls & How to Avoid Them
Frequently Asked Questions
How do I calculate profit margin?
Subtract the cost from the selling price, divide the result by the selling price and multiply by 100. An item sold for 150 that cost 105 has a margin of (150 − 105) ÷ 150 = 30%.
What is the difference between markup and margin?
Markup divides profit by cost, margin divides it by the selling price. With a cost of 80 and a price of 100, markup is 25% and margin is 20%. When you write a price list, say clearly which one you mean.
Which currency does the calculator use?
None by default; results appear as plain numbers. You can pick your own currency from the list if you like. Numbers are formatted for this page's language and are never sent anywhere.
Can a margin be 100%?
No. A 100% margin would mean the item cost nothing, so the target margin has to stay below 100%. Markup has no upper limit: an item sold at twice its cost has a 100% markup and a 50% margin.