What is profit margin?

Profit margin shows what percentage of the selling price remains as profit after covering the cost. It is based on selling price, not on cost.

What is the difference between margin and markup?

Margin is profit as a percentage of the selling price. Markup is profit as a percentage of cost. They use different baselines, so the percentages are not the same.

How do I calculate margin from cost and selling price?

Subtract cost from selling price to get profit, then divide that profit by the selling price and multiply by 100. For example, selling at 100 on a cost of 80 leaves 20 profit, and 20 ÷ 100 × 100 = 20%.

Margin calculator

Margin Calculator

Use this margin calculator to work out gross margin percentage and profit amount from cost and selling price. It shows how much profit is left inside the selling price.

Gross margin

20%

Selling at 100 on a cost of 80 leaves 20 profit and a 20% gross margin.

Profit amount

Selling price

100

How it works

Measure profit against the selling price

A margin calculator starts with cost and selling price, works out the profit in money, and then compares that profit with the selling price to show the gross margin percentage.

Formula

gross margin % = ((selling price - cost) ÷ selling price) × 100

First calculate profit from selling price minus cost, then divide that profit by the selling price.

Worked example

1. Start with a cost of 80 and a selling price of 100.
2. Subtract 80 from 100 to get 20 profit.
3. Divide 20 by 100 to get 0.2.
4. Multiply by 100 to get a 20% gross margin.

When people use this

Retail: check whether a selling price leaves enough margin.
Services: compare client pricing against delivery cost.
Finance: monitor the margin built into a pricing model.
Planning: compare different selling prices before launch.

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