Use our free Profit Margin Calculator to accurately determine your gross profit, margin percentage, and markup. Perfect for optimizing your pricing strategy and scaling your business.
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Understanding your numbers is the first step toward building a sustainable business. Our Profit Margin Calculator is designed to provide instant clarity on your earnings. Whether you are selling physical products, digital goods, or offering services, knowing exactly how much profit you retain from every sale is crucial for long-term success.
Many new entrepreneurs confuse margin and markup, but they represent different financial perspectives. Profit Margin looks at the profit in relation to the selling price. For example, if you sell an item for $100 and it cost you $70, your margin is 30%.
On the other hand, Markup looks at the profit in relation to the cost. Using the same example, your markup would be approximately 42.8%. While both are useful, margins are typically used for internal reporting and health checks, while markups are often used to set initial prices. If you're also managing service-based work, you might find our Freelance Hourly Rate Calculator helpful for setting your base costs.
To get the most accurate results, ensure you are including all "Costs of Goods Sold" (COGS). This includes the raw purchase price, shipping fees, packaging, and any transaction fees. For those selling online, don't forget to account for payment processing using a PayPal Fee Calculator to ensure your "Cost" input is 100% accurate.
Once you have your total cost, enter it into the first field, followed by your intended selling price. The tool will handle the rest, showing you if your current pricing model is healthy or if you need to adjust your rates to reach a target gross margin.
A "good" margin varies by industry. Retail often operates on 5-10% margins, while software and consulting can see margins of 60% or higher. Generally, a 20% margin is considered healthy for many small businesses.
Yes. If your cost of goods sold is higher than your selling price, you will have a negative profit margin, meaning you are losing money on every sale.
You can increase margins by either raising your selling price or lowering your cost of production/acquisition. Improving operational efficiency and reducing waste are also effective strategies.