Margin Calculator

What is gross margin?

Gross margin is the share of a sale you keep after paying for what you sold. If a product costs you $60 and sells for $100, you keep $40, a 40% gross margin. Businesses use it to set prices, compare products, and check whether sales actually cover costs.

This margin calculator works with four values: cost, revenue (selling price), gross margin, and profit. Enter any two and it solves for the other two, so it also works as a profit margin calculator, a gross profit margin calculator, or a selling price calculator when you know the margin you want.

Profit and gross margin formula: how to calculate profit margin

• Profit = revenue − cost
• Gross margin = profit ÷ revenue × 100%
• Revenue from cost and margin = cost ÷ (1 − margin)
• Cost from revenue and margin = revenue × (1 − margin)

To calculate profit margin by hand, subtract cost from revenue, then divide the result by revenue. For example, a $100 sale with a $60 cost gives $40 of profit, and $40 ÷ $100 = 40%.

To find a selling price, divide cost by one minus the margin you want. For a 40% margin on a $60 cost, the price is $60 ÷ (1 − 0.40) = $100. Adding 40% to the cost ($84) would only give a 28.57% margin.

Margin vs markup

Margin and markup use the same profit but divide it by different numbers. Margin divides profit by revenue, and markup divides profit by cost. The $60 item sold for $100 has a 40% margin but a 66.67% markup ($40 ÷ $60). Markup is always higher than margin for a profitable sale, so mixing them up leads to underpricing.

To turn a margin into a markup, use markup = margin ÷ (1 − margin). To go the other way, use margin = markup ÷ (1 + markup).

Frequently asked questions

What is a good profit margin?

It depends on the industry. Grocery and other high-volume retail often runs on thin margins, while software and luxury goods tend to run much higher. Compare your margin with similar businesses rather than with a single number.

Can gross margin be 100% or more?

No. Margin is profit as a share of revenue, and profit can never be more than revenue, so a margin can approach but never reach 100%. A margin of 100% would mean the item cost nothing. Markup, on the other hand, has no upper limit.

What does a negative margin mean?

You are selling below cost. A $50 sale of an item that cost $60 loses $10, a margin of −20%. You can enter a negative profit or margin in the calculator to see the result.

Is gross margin the same as net profit margin?

No. Gross margin only subtracts the direct cost of what you sold. Net profit margin also subtracts rent, wages, marketing, interest, taxes, and every other expense, so it is lower. Enter only the direct cost to get gross margin.