Margin Calculator
Margin and markup are different numbers — confusing them quietly eats profit. See both from your cost and price, or get the exact price for the margin you want.
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Last reviewed: July 20, 2026 · Formulas verified by automated tests before every release.
The trap, in one example
A shop owner wants "40% profit" on a $60 item. Multiplying cost by 1.4 gives $84 — but that's 40% markup, which is only a 28.6% margin. The price that truly leaves 40% of revenue as profit is $100 (cost ÷ 0.6). On a thousand sales, the difference is $16,000 of profit that was intended but never priced in.
Margin = (Price − Cost) ÷ Price · Markup = (Price − Cost) ÷ Cost · Price for target margin = Cost ÷ (1 − Margin)
Which number to use when
- Setting prices: think in markup (it starts from cost, which you know).
- Reading financials: think in margin (it's how P&L statements and investors speak).
- Talking to suppliers or partners: say the word explicitly — "40% margin" and "40% markup" differ by a third.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a share of the PRICE; markup is profit as a share of the COST. Buy at $60, sell at $100: margin is 40% (40/100), markup is 66.7% (40/60). Same deal, two numbers — mixing them up is the most expensive confusion in small business pricing.
How do I price a product for a target margin?
Price = cost ÷ (1 − margin). For a 40% margin on a $60 cost: 60 ÷ 0.6 = $100. The common mistake — cost × 1.4 = $84 — actually gives only a 28.6% margin.
Why can't margin be 100% or more?
Because margin is measured from the price: even selling something you got for free tops out just under 100%. If someone promises "200% margin", they mean markup.
What is a good profit margin?
It varies wildly by industry: grocery retail lives on 1–3% net, software can exceed 70% gross. Compare yourself to your industry's benchmark, not to a universal number.