Understand the profit behind your sales
Revenue tells you how much you sell. Profit margin helps you see how much remains after the costs you include. Use this free calculator to review a product, a project, or a reporting period without building a spreadsheet.
Enter your revenue and cost above, or try the example to see a complete calculation. You will get profit in your input currency and two percentages that answer different questions: margin for revenue efficiency, and markup for the amount earned above cost.
What Is Profit Margin?
Profit margin is profit expressed as a percentage of revenue. A 30% margin means that 30 cents of each dollar of revenue remain after the costs in your calculation. It does not mean every dollar is available to spend: expenses omitted from your cost input still need to be covered.
Gross margin uses cost of goods sold. Operating margin also reflects operating expenses. Net margin reflects all relevant expenses, including interest and taxes. Label the cost total you use so comparisons measure the same thing.
Profit Margin Formula
Profit = Revenue − Cost
Profit Margin = (Profit / Revenue) × 100
Markup = (Profit / Cost) × 100
Revenue is the sales amount for the item or period. Cost is the expense total you choose to subtract. Profit is the difference. Multiply each ratio by 100 to express it as a percentage.
A zero denominator makes a percentage undefined. This calculator shows N/A for margin when revenue is zero and for markup when cost is zero, while still calculating profit.
How To Calculate Profit Margin
- Choose the scope. Decide whether you are reviewing a single product, a project, or an entire business period.
- Gather matching figures. Use revenue and associated costs for the same scope, time period, and currency.
- Subtract costs. Revenue minus cost gives profit or, if negative, a loss.
- Divide by revenue. Multiply the result by 100 to find profit margin.
- Interpret the result. Compare like-for-like margins and review which expenses your cost total includes.
Real Business Example
Consider an illustrative online retailer reviewing one month of product sales. It records $10,000 in revenue and $7,000 in cost of goods sold. These example figures show a realistic workflow; they are not reported results from an actual company.
- Profit = $10,000 − $7,000 = $3,000
- Gross profit margin = ($3,000 / $10,000) × 100 = 30.00%
- Markup = ($3,000 / $7,000) × 100 = 42.86%
The retailer retains 30 cents per dollar of revenue before expenses excluded from cost of goods sold. If it also includes $1,500 of other expenses in cost, profit falls to $1,500 and the margin becomes 15%. The difference comes from the expense scope, not a different margin formula.
Margin vs Markup
Both metrics use the same profit amount, but they measure it against different bases. Using markup as if it were margin can lead to a selling price below your intended target.
| Measure | Profit Margin | Markup |
|---|---|---|
| Compared with | Revenue | Cost |
| Formula | Profit / Revenue × 100 | Profit / Cost × 100 |
| $100 sale, $70 cost | 30.00% | 42.86% |
| Useful question | How much of sales remains? | How much was added above cost? |
For example, adding a 30% markup to a $70 cost sets a $91 price. That creates $21 profit, or approximately 23.08% margin. To reach a 30% margin at that cost, the selling price would be $100.
Common Mistakes When Calculating Profit Margin
- Mixing up margin and markup. Divide by revenue for margin and by cost for markup.
- Leaving out expenses. Shipping, payment fees, refunds, and overhead can change the result. Include the costs appropriate to the measure you want.
- Comparing different periods. One month's revenue and a quarter's costs do not describe the same activity.
- Mixing units or currencies. A per-unit cost should be compared with per-unit revenue, and both amounts must use the same currency.
- Comparing gross and net margins. Match expense definitions before comparing products, periods, or businesses.
- Rounding too early. Use original amounts and round the final display, rather than intermediate calculations.
- Treating margin as cash flow. A profit calculation does not show when customers pay or when bills are due.
Frequently Asked Questions
What is a good profit margin?
A useful target depends on your industry, business model, and which costs you include. Compare the same type of margin over time and against comparable businesses rather than treating one percentage as a universal target.
What is the difference between margin and markup?
Margin divides profit by revenue; markup divides profit by cost. If an item costs $70 and sells for $100, its $30 profit represents a 30% margin and approximately 42.86% markup.
How do businesses calculate profit?
Subtract the costs included in your chosen profit measure from revenue for the same period. Subtract cost of goods sold for gross profit, or all relevant expenses for net profit.
Does this calculator show gross or net profit margin?
It depends on the cost you enter. Cost of goods sold produces gross margin. A total that includes all relevant expenses produces net margin. The calculator does not automatically add missing expenses.
Can profit margin be negative?
Yes. If cost exceeds revenue, profit and profit margin are negative. For example, revenue of $100 and cost of $120 produce a loss of $20 and a margin of -20%.
What happens when revenue or cost is zero?
Zero revenue makes profit margin undefined, and zero cost makes markup undefined. The affected result displays N/A. Profit still equals revenue minus cost, including when both inputs are zero.
Can I use a currency other than US dollars?
Yes. Enter both amounts in the same currency. Profit is expressed in that currency, while margin and markup are percentages. The tool does not convert exchange rates or apply a currency symbol.
Which time period should I use?
Use matching periods for both inputs, such as one month, quarter, or year. For a single product, use selling revenue and corresponding product costs at the same unit or order level.
Are my financial inputs saved or sent anywhere?
This calculator processes inputs in your browser. Its code does not send these amounts to a server, save them in a database, or retain them in browser storage. Reset clears the form.
Why are the displayed percentages rounded?
Results are displayed to two decimal places for readability. Calculations use the unrounded input values. Keep the original figures when doing additional calculations to avoid compounding display-rounding differences.