What next?
Margin is what survives the costs. These are the levers on it.
What your result means
Profit margin is profit as a share of the selling price — it answers "how much of every pound taken is kept". Markup is profit as a share of the cost — it answers "how much did I add on". They are always different numbers for the same sale, and confusing them is one of the most common pricing mistakes in small business.
Why this one is different
Name the margin you want and the price that achieves it is returned — the calculation behind a repricing decision, rather than a post-mortem on one already made. A unit count turns per-unit profit into the total the line actually earns, so a thin margin on high volume can be weighed against a fat one on almost none.
A 50% markup is only a 33% margin
Buy at 40, add 50% markup, sell at 60. The profit is 20 — but 20 out of a 60 selling price is a 33% margin, not 50%. Price from markup and report on margin, and the numbers will never reconcile.
Pick one convention and use it everywhere. If your accountant talks in margin and your suppliers quote in markup, this calculator translates between them in one step.
How it works
Gross profit is the selling price minus the cost of the goods. Dividing that by the price gives margin; dividing it by the cost gives markup. To hit a target margin the price must be the cost divided by one minus that margin — dividing, not multiplying, is what trips people up.
How to use this calculator
- Choose your currency.
- Enter your cost per unit — what the item costs you to buy or make.
- Enter the selling price.
- Set a target margin to see the price you would need to charge.
- Add units sold for a total profit figure.
Formula
P = selling price, C = cost, m = target margin as a decimal.
Example calculation
An item costing £40 sold at £65:
Margin = 38.5%
Markup = 62.5%
Price for a 50% margin = £80
Frequently asked questions
Is this gross or net margin?＋
Gross. It covers only the direct cost of the goods. Net margin also deducts overheads, salaries, marketing and tax, and is always lower — often dramatically so in retail.
Why can margin never reach 100%?＋
Margin is profit divided by price, and profit can never exceed price unless the cost is zero. Markup has no such ceiling — a cost of 10 sold at 100 is a 900% markup but a 90% margin.
What margin should I aim for?＋
It varies enormously by sector: grocery retail runs on low single digits, while software can exceed 80%. Benchmark against your own industry rather than a general rule.
What is the difference between gross, operating and net margin?＋
Gross margin subtracts only the direct cost of what you sold. Operating margin also subtracts the cost of running the business — rent, salaries, marketing. Net margin subtracts everything remaining, including interest and tax. Each is smaller than the last, and quoting one while meaning another is a common source of confusion.
Why do two businesses with the same margin perform differently?＋
Because margin says nothing about volume or how fast stock turns over. A supermarket with a low margin and enormous turnover can be far more profitable than a specialist with a high margin and few sales. Margin multiplied by volume is the figure that pays the bills.
Does a falling margin always mean something is wrong?＋
Not necessarily. It can reflect a deliberate move to win volume or enter a market, and if total profit rises it may be working. It becomes a problem when it is unintentional — costs creeping up, discounting becoming habitual, or a shift in the mix toward lower-margin lines that nobody decided on.
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Assumptions & limitations
Every figure here comes from a simplified model. Keep these limits in mind when reading your result:
- Covers gross margin only — overheads, wages, shipping and tax are excluded.
- Assumes cost and price are both net of sales tax or VAT.
- Total profit assumes every unit sells at the same price with no discounts or returns.