Profit margin calculator: price with margin in mind, not just markup
Margin and markup describe the same profit in two different ways, and mixing them up is one of the most common pricing mistakes in small business. A 50% markup is only a 33% margin. This calculator shows both from your cost and price, converts between them, and works out the price you’d need to hit a target margin.
Profit margin and markup calculator
- Gross margin
- –
- Markup
- –
- Profit per unit
- –
- Price for your target margin
- –
| Margin | Markup | Price at your cost |
|---|
Margin is profit as a share of the price; markup is profit as a share of the cost. This is gross margin on a single unit: it doesn’t include overhead, such as rent, salaries or marketing, or sales tax. Everything here runs in your browser; nothing you enter is stored or sent.
What this calculator can help you understand
- Your gross margin and markup on each unit.
- Profit per unit in dollars.
- The price you’d need for a target margin.
- How margin and markup convert.
When it’s useful
- When setting prices for a new product or service.
- When your costs go up and you need to reprice.
- When a supplier quotes a markup and you think in margins.
- When reviewing which products earn the most.
Who it’s for
- Small business owners and retailers.
- Freelancers and makers pricing their work.
- Anyone preparing a business plan.
What to enter
| Input | What it means | Where to find it |
|---|---|---|
| Cost per unit | What it costs you to make or buy one unit | Supplier invoices or your cost sheet |
| Selling price | What you charge per unit | Your price list |
| Target margin | The gross margin you want to reach | Your plan, or industry benchmarks |
How to use it
- Enter your cost per unit and selling price.
- Read your margin, markup and profit per unit.
- Enter a target margin to see the price you’d need.
- Use the table to convert between margin and markup.
Understanding your results
- Profit per unit = price − cost.
- Gross margin = profit ÷ price.
- Markup = profit ÷ cost.
- Price for a target margin = cost ÷ (1 − margin).
A worked example
Suppose an item costs you $60 and you sell it for $100.
- Profit per unit: $40.00.
- Margin: 40.0%. Markup: 66.7%.
- For a 50% margin: price it at $120.00.
- The common mix-up: adding a 50% markup instead gives $90.00, only a 33.3% margin.
- What it means: if your plan assumes a 50% margin, pricing with a 50% markup leaves you well short of it.
Common mistakes
- Confusing margin and markup.
- Leaving costs out of the cost per unit, such as shipping or payment fees.
- Treating gross margin as profit. Overhead still has to be paid.
- Pricing only from cost. What customers will pay and what competitors charge matter too.
What to do with your result
- See how many units you need to sell to cover overhead with the break-even calculator.
- Revisit prices when supplier costs change.
- Compare margins across products and focus on the ones that earn the most.
Limitations to keep in mind
The calculator works with a single unit’s cost and price. It doesn’t include overhead, discounts, returns, sales tax or volume pricing. This isn’t accounting or tax advice.
Frequently asked questions
What’s the difference between margin and markup?
Both start from profit: price minus cost. Margin divides profit by the price; markup divides it by the cost. Selling for $100 something that costs $60 is a 40.0% margin and a 66.7% markup.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 50% markup is a 33.3% margin. To go the other way, markup = margin ÷ (1 − margin).
How do I price for a target margin?
Price = cost ÷ (1 − target margin). For a 50% margin on a $60 cost, that’s $120.00. A 50% markup would give only $90.00, a 33.3% margin.
What’s a good profit margin?
It varies widely by industry. Grocery stores run on thin margins, while software can be much higher. Compare yourself with businesses like yours, and make sure margins cover your overhead.
Is gross margin the same as net margin?
No. Gross margin only subtracts the direct cost of what you sell. Net margin also subtracts overhead, like rent, salaries and marketing, as well as interest and taxes.
What costs belong in the cost per unit?
The direct costs of each item: materials, the wholesale price, packaging, inbound shipping and direct labor. Overhead belongs in a break-even analysis instead.
Related reading
Related calculators
This calculator gives estimates for illustration, based on the figures you enter and the assumptions described on this page. It isn’t financial, tax or legal advice, an offer, or a guarantee of any outcome.