Profit Margin Calculator
Margin vs. Markup
Profit Margin
Percentage of revenue that is profit. Always less than 100%. Used by analysts and investors.
Markup
Percentage added to cost to get selling price. Can exceed 100%. Used by retailers and wholesalers.
| Margin | Markup |
|---|---|
| 15% | 17.65% |
| 20% | 25% |
| 25% | 33.33% |
| 30% | 42.86% |
| 33.33% | 50% |
| 40% | 66.67% |
| 50% | 100% |
Quick Formulas
Related Calculators
Understanding Profit Margin and Markup
Margin vs. Markup: What's the Difference?
While both margin and markup measure profit, they use different denominators: margin is based on selling price, while markup is based on cost. This distinction is crucial for pricing decisions and financial analysis.
Profit Margin
Shows what percentage of each sale is profit. A 25% margin means $0.25 profit for every $1 in revenue.
Markup
Shows how much you add to cost. A 33% markup means adding $0.33 for every $1 of cost.
Example: Same Numbers, Different Perspective
Converting Between Margin and Markup
Common Margin/Markup Reference
| Margin | Markup | Example |
|---|---|---|
| 10% | 11.11% | $90 cost → $100 price |
| 20% | 25% | $80 cost → $100 price |
| 25% | 33.33% | $75 cost → $100 price |
| 33.33% | 50% | $66.67 cost → $100 price |
| 50% | 100% | $50 cost → $100 price |
| 75% | 300% | $25 cost → $100 price |
Types of Profit Margin
Gross Profit Margin
Revenue minus Cost of Goods Sold (COGS), divided by Revenue. Shows profitability before operating expenses.
Operating Profit Margin
Revenue minus all operating expenses, divided by Revenue. Shows profitability from core business operations.
Net Profit Margin
Revenue minus all expenses (including taxes and interest), divided by Revenue. Shows bottom-line profitability.
Industry Note
Profit margins vary widely by industry. Grocery stores might operate on 2-3% net margins, while software companies can achieve 20-30%+. Always compare margins within the same industry for meaningful analysis.
Frequently Asked Questions
What is the difference between margin and markup?
Margin is profit as a percentage of selling price (Profit/Revenue). Markup is profit as a percentage of cost (Profit/Cost). Same dollar profit, different percentages. A $25 profit on a $100 sale is 25% margin, but on $75 cost is 33.3% markup. Margin is always lower than markup for the same transaction.
How do I convert margin to markup?
Use the formula: Markup = Margin / (1 - Margin). For example, 25% margin = 0.25 / (1 - 0.25) = 0.25 / 0.75 = 33.3% markup. Conversely, Margin = Markup / (1 + Markup). So 33.3% markup = 0.333 / 1.333 = 25% margin.
What is a good profit margin?
It varies widely by industry. Grocery stores operate on 2-3% net margins, while software companies achieve 20-30%+. Restaurants typically see 3-9% net margins. Gross margins are higher - retailers aim for 30-50%. Compare within your specific industry for meaningful benchmarks.
What is the difference between gross and net profit margin?
Gross margin = (Revenue - Cost of Goods Sold) / Revenue. It shows profitability before operating expenses. Net margin = (Revenue - All Expenses) / Revenue. It shows bottom-line profitability after everything including taxes and interest. A business can have healthy gross margins but poor net margins if operating costs are high.