Profit margin calculator
Profit Margin Calculator
Calculate your gross profit, profit margin, markup and target selling price. Switch between modes to find margin, price or markup.
40.00%
Profit Margin Calculator
Profit margin measures how much profit a business keeps from each sale. Calculate profit margin by dividing profit by revenue and multiplying by 100.
Example
- Selling price
- £100
- Cost
- £60
- Profit
- £40
- Profit margin
- 40%
How to calculate profit margin
Profit margin shows the percentage of revenue remaining after costs are deducted. Use net (ex-VAT) figures for both revenue and cost.
- Calculate profit: Revenue − Cost
- Divide profit by revenue.
- Multiply by 100.
profit = revenue − cost
margin% = profit ÷ revenue × 100
Example
Revenue: £10,000
Costs: £6,000
Profit: £4,000
Margin: 40%
Formulas
Margin & markup
grossProfit = sellingPrice − cost
margin% = grossProfit ÷ sellingPrice × 100
markup% = grossProfit ÷ cost × 100
Selling price from a target
price = cost ÷ (1 − margin ÷ 100)
price = cost × (1 + markup ÷ 100)
How this calculator works
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Open Calculator Library →Profit Margin vs Markup
Margin is profit divided by selling price. Markup is profit divided by cost price. They measure the same profit but use different denominators, so the percentage values differ.
Margin: profit ÷ selling price
Margin: 40%
Markup: profit ÷ cost price
Markup: 66.7%
Confusing them is the fastest way to under-price. See the full markup vs margin guide for a step-by-step walkthrough.
| Cost | Selling price | Gross profit | Margin | Markup |
|---|---|---|---|---|
| £10.00 | £12.50 | £2.50 | 20.00% | 25.00% |
| £20.00 | £30.00 | £10.00 | 33.33% | 50.00% |
| £30.00 | £50.00 | £20.00 | 40.00% | 66.67% |
| £40.00 | £80.00 | £40.00 | 50.00% | 100.00% |
| £25.00 | £100.00 | £75.00 | 75.00% | 300.00% |
Profit Margin Examples
These worked examples show how profit margin changes with revenue, cost and pricing strategy.
Freelancer service
Costs: £2,000
Profit: £3,000
Margin: 60%
Retail product
Selling price: £80
Profit: £30
Margin: 37.5%
Product — £30 cost, £50 price
Service — £80/hr cost, 50% target margin
Reseller — £30 cost, 50% target markup
Consultant — £200 cost, 70% target margin
How margin relates to break-even
Your gross margin is the fuel that pays fixed costs. The higher the margin, the fewer units you need to sell to break even. If your fixed costs are £4,000 a month and your gross margin per unit is £20, you need 200 units a month to break even (£4,000 ÷ £20). Halve the margin to £10 and you need 400 units. Run the numbers in the Break-even Calculator — or read the UK business pricing guide.
Common pricing mistakes
- Including VAT in cost or price — always work in net figures.
- Forgetting variable costs like payment processing, packaging and platform fees when setting price.
- Treating a target markup as if it were a target margin.
Questions
How do I calculate profit margin?
Profit margin is calculated by dividing profit by revenue and multiplying by 100. For example, £40 profit on £100 revenue gives a 40% profit margin.What is profit margin?
Profit margin is gross profit as a percentage of selling price. For example, if you sell something for £50 and it costs you £30, the £20 profit is 40% of the £50 price.What is a good profit margin?
A good profit margin depends on industry, costs and business model. Businesses should compare margins against their own goals and industry benchmarks.What is the difference between margin and markup?
Margin uses selling price as the denominator, while markup uses cost price. A £40 profit on a £60 cost and £100 selling price is a 40% margin and a 66.7% markup.What is markup?
Markup is gross profit as a percentage of cost. The same £20 profit on a £30 cost is a 66.67% markup.How do I calculate selling price from target margin?
Divide your cost by (1 − target margin / 100). For example, a £30 cost with a 40% target margin gives a £50 selling price.Why is my margin lower than my markup?
Margin uses a larger denominator (selling price) than markup (cost), so the same profit is always a smaller percentage when expressed as margin.Should I include VAT in profit margin calculations?
Use net (ex-VAT) figures for both cost and selling price. VAT is collected on behalf of HMRC — it is not your revenue or your cost.
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