Free Margin Calculator
Optimize your pricing strategy. Calculate gross margin, markup percentage, and profit from your cost and revenue.
Last Updated: 15 Jan 2026
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Analyze Profitability
Calculate margins, markups, and profits
Understanding Profit Margins
Profit margin is a key financial metric that shows what percentage of your revenue is profit. It's essential for pricing strategy, financial planning, and business profitability analysis. Understanding margins helps you set prices that cover costs while remaining competitive in the market.
Gross margin specifically measures the profitability of individual products or services before accounting for operating expenses. It's calculated as (Revenue - Cost of Goods Sold) / Revenue × 100, showing how much of each dollar in sales contributes to covering overhead and generating profit.
Margin vs. Markup: Critical Difference
Important: They're Not the Same!
These two terms are often confused but mean very different things. A 50% Markup is NOT the same as a 50% Margin.
Example: If something costs $100 and you sell it for $150:
- Markup: 50% (You added 50% to the cost: $50 profit on $100 cost)
- Margin: 33.3% (Profit is 33.3% of the selling price: $50 profit on $150 revenue)
Why Use Our Free Margin Calculator?
Instant Calculations
Calculate margins, markup, and profit instantly as you adjust costs and prices. No complex formulas needed—get results immediately.
Pricing Strategy
Determine optimal selling prices to achieve target margins, helping you balance profitability with market competitiveness.
Business Analysis
Analyze product profitability, compare margins across products, and identify opportunities to improve financial performance.
Common Use Cases for Margin Calculation
Pricing Strategy
Setting Product Prices
Calculate selling prices needed to achieve target profit margins, ensuring prices cover costs and generate desired profitability.
Competitive Analysis
Compare your margins with industry standards to ensure you're pricing competitively while maintaining profitability.
Discount Planning
Determine maximum discount percentages that maintain acceptable margins, helping you plan sales and promotions effectively.
Financial Planning
Product Profitability
Analyze which products or services generate the best margins, helping you focus resources on high-profit offerings.
Cost Management
Understand how cost changes affect margins, helping you make informed decisions about suppliers, materials, or operations.
Financial Reporting
Calculate margins for financial statements, investor presentations, or business plans to demonstrate profitability.
Margin and Markup Formulas
Gross Margin
Margin = ((Revenue - Cost) / Revenue) × 100Shows what percentage of sales is profit.
Example: $150 revenue, $100 cost = 33.3% margin
Markup Percentage
Markup = ((Revenue - Cost) / Cost) × 100Shows how much price was increased over cost.
Example: $150 revenue, $100 cost = 50% markup
Calculate Selling Price from Margin
Selling Price = Cost / (1 - Margin %)Use this when you know your cost and desired margin percentage.
Example: $100 cost, 20% margin = $100 / 0.80 = $125
Frequently Asked Questions
What is the difference between Margin and Markup?
Margin is profit divided by Revenue (Selling Price), while Markup is profit divided by Cost. Margin is always a percentage of the final sale, whereas markup is percentage added to the cost.
What's a good profit margin?
Good margins vary by industry. Retail typically sees 2-5% net margins, while software can achieve 80%+ gross margins. Generally, 10-20% gross margin is considered healthy for most businesses.
How do I calculate Selling Price if I know my desired Margin?
Selling Price = Cost / (1 - Margin %). For example, if Cost is $100 and you want a 20% margin, Selling Price = 100 / (1 - 0.20) = $125.
What's the difference between gross and net margin?
Gross margin is profit after direct costs (COGS). Net margin is profit after all expenses including operating costs, taxes, and interest. Gross margin shows product profitability; net margin shows overall business profitability.
How do I increase my profit margin?
Increase margins by: (1) Raising prices (if market allows), (2) Reducing costs (negotiate with suppliers, improve efficiency), (3) Selling higher-margin products, or (4) Increasing sales volume to spread fixed costs.
Why is Gross Margin important?
Gross Margin indicates how much money you retain from each dollar of revenue to pay for operating expenses and generate net profit. It is a key indicator of production efficiency and pricing strategy effectiveness.
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