Margin Calculator
Calculate gross profit and gross margin.
What is Profit Margin?
Profit margin is the percentage of revenue that remains as profit after deducting costs. Gross margin considers only the cost of goods sold. Net margin considers all expenses. Margin helps businesses understand profitability, set prices, and compare performance across products or time periods.
Margin Formula
Margin % = (Selling Price - Cost) / Selling Price * 100. For example, if a product costs $60 and sells for $100: Margin = (100 - 60) / 100 * 100 = 40%. This means 40% of each sale is profit. To find selling price from desired margin: Selling Price = Cost / (1 - Margin%/100).
Margin vs Markup
Margin and markup are often confused but are different. Margin = Profit / Selling Price. Markup = Profit / Cost. Example: Cost $60, Selling Price $100, Profit $40. Margin = 40/100 = 40%. Markup = 40/60 = 66.7%. A 50% markup = 33.3% margin. Always use margin for profitability analysis.
Industry Margin Benchmarks
- •Typical gross margins by industry: Software (70-80%), Restaurants (60-70%), Retail (40-50%), Manufacturing (30-40%), Grocery (20-30%), Construction (15-25%). Net margins are typically 10-20 percentage points lower than gross margins. Compare your margins to industry averages for context.
Common Pricing Mistakes
Confusing margin with markup (leads to underpricing). Not accounting for all costs (shipping, handling, returns). Setting prices based only on competitors (ignores your costs). Not reviewing margins regularly (costs change over time). Ignoring volume impact (lower margin with higher volume may be more profitable).
Comparison Analysis
Margin vs Markup Comparison
| Criteria | Margin | Markup |
|---|---|---|
| Formula | Profit / Selling Price | Profit / Cost |
| $60 cost, $100 price | 40% | 66.7% |
| 50% equals | 50% margin = 100% markup | 50% markup = 33.3% margin |
| Based On | Revenue (selling price) | Cost |
| Use For | Profitability analysis | Setting prices from cost |
Content Verification
Expert Review
Reviewed by Karen White, Certified Management Accountant (CMA), Pricing Strategy Consultant
Authoritative Sources
Based on management accounting standards, HBR research, and industry benchmark data
Last Reviewed
Content verified May 2026 against current industry margin benchmarks and pricing best practices