Margin Calculator
Calculate profit margin from cost and revenue, or find the required revenue for a target margin. Includes markup comparison. See also Markup Calculator and Discount Calculator.
How to Calculate Profit Margin
Profit margin (also called gross margin) is the percentage of revenue that remains as profit after subtracting the cost. Unlike markup (which is based on cost), margin is based on the selling price or revenue. A 40% margin means that for every dollar of revenue, 40 cents is profit. Margin is widely used in financial analysis because it directly shows what portion of sales translates to profit, making it easier to compare profitability across different products or businesses.
Margin Formula
Margin % = ((Revenue − Cost) / Revenue) × 100
To find revenue from target margin:
Revenue = Cost / (1 − Margin% / 100)
Converting between margin and markup:
Margin = Markup / (1 + Markup)
Markup = Margin / (1 − Margin)
Example Calculation
Cost: $60.00
Revenue: $100.00
Profit = $100 − $60 = $40.00
Margin = 40 / 100 × 100 = 40%
Markup = 40 / 60 × 100 = 66.67%
Cost Ratio = 60 / 100 × 100 = 60%
Margin Reference Table
| Cost | Revenue | Profit | Margin | Markup |
|---|---|---|---|---|
| $60 | $100 | $40 | 40.00% | 66.67% |
| $70 | $100 | $30 | 30.00% | 42.86% |
| $80 | $100 | $20 | 20.00% | 25.00% |
| $50 | $100 | $50 | 50.00% | 100.00% |
| $25 | $100 | $75 | 75.00% | 300.00% |
| $40 | $80 | $40 | 50.00% | 100.00% |
Frequently Asked Questions
What is the difference between margin and markup?
Margin is profit as a percentage of revenue (selling price), while markup is profit as a percentage of cost. For the same transaction, margin is always lower than markup. A 50% markup equals a 33.33% margin. A 100% markup equals a 50% margin.
What is a good profit margin?
Good margins vary by industry. Software companies often achieve 70-90% gross margins. Retail typically sees 25-50%. Restaurants average 3-9% net margin. Manufacturing ranges from 10-30%. Compare within your industry for meaningful benchmarks.
Can margin be over 100%?
No. Margin is calculated as a percentage of revenue, so it can never reach or exceed 100%. A 99% margin means cost is only 1% of revenue. Markup, however, can exceed 100% (a 200% markup means selling at 3x cost).
What is gross margin vs net margin?
Gross margin only considers the direct cost of goods sold (COGS). Net margin accounts for all expenses including overhead, taxes, interest, and operating costs. Net margin is always lower than gross margin and gives a more complete picture of profitability.
Why do businesses use margin instead of markup?
Margin directly shows what percentage of revenue is profit, making it easier to calculate profitability from sales figures. Financial statements report margins, and investors use margin to compare companies. Markup is more useful for pricing individual products.