Profit Margin Calculator
Find out how much of every sale you actually keep as profit. Enter your cost and price, or work backward from the margin you want to hit.
What profit margin really tells you
Profit margin shows how much of each sale you actually keep. Picture a lemonade stand. Each cup costs you 50 cents to make. You sell it for 2 dollars. You keep $1.50 from every sale. That $1.50 is your profit. Divide it by the $2 price and you get 75%. That is your profit margin.
Margin is not the same as profit in dollars. A high margin on a cheap product can still earn less money than a low margin on an expensive one. Both numbers matter together.
The result on top, before dividing, is your
profit per unit.
Margin and markup are easy to mix up
These two numbers use the same ingredients but answer different questions. Margin asks what share of the price is profit. Markup asks how much you added on top of your cost. They will almost never be the same number.
| Metric | Question it answers | Formula |
|---|---|---|
| Profit margin | What share of my price is profit? | Profit ÷ Price |
| Markup | How much did I add on top of my cost? | Profit ÷ Cost |
Take a $10 cost item sold for $20. Profit is $10 either way. Markup is 100%, since you doubled your cost. Margin is only 50%, since profit is half the price. Mixing these up is one of the most common pricing mistakes small business owners make.
- Price using margin, not markup. A 100% markup sounds strong but only produces a 50% margin. Decide your target margin first, then work out the price.
- Track margin by product, not just overall. One bestseller with thin margin can quietly drag down a business that looks profitable on paper.
- Compare against your industry, not a random number. A 10% margin is thin for software but strong for a grocery store.
Frequently asked questions
No. Profit is a dollar amount. Margin is a percentage showing what share of the price that profit represents. You need both to understand a business fully.
No, profit margin cannot exceed 100%, since profit can never be larger than the selling price itself. Markup, on the other hand, can go well beyond 100%.
Not necessarily. A very high margin can mean prices are too high to attract enough customers. The healthiest margin balances profit with steady sales volume.
Profit margin looks at a single sale or product. ROI looks at the return on money invested overall, often across a longer period. They answer related but different questions.
Want to know how many units you need to sell to break even?
Try the Break-Even Calculator next.
Break-Even Calculator Back to Toolkit