Profit Margin & Markup Calculator
Turn cost and sale price into margin %, markup %, and profit per unit.
How This Calculator Works
This calculator uses two fundamental business formulas to analyze your pricing:
Profit Margin Formula:
Profit Margin % = (Selling Price - Total Cost) ÷ Selling Price × 100
This tells you what percentage of your selling price is actual profit. A £100 item with £60 total cost has a 40% margin.
Markup Formula:
Markup % = (Selling Price - Total Cost) ÷ Total Cost × 100
This shows profit as a percentage of cost. The same £100 item has a 66.7% markup (£40 profit ÷ £60 cost).
Why Two Numbers?
Margin and markup sound similar but give very different percentages from the same numbers. Margin is always lower because it divides by the larger number (selling price). Markup can exceed 100%, margin cannot.
The calculator also factors in per-unit overhead—hidden costs like packaging, payment fees, or shipping materials that eat into your profit but aren't in the base cost.
When to Use This Calculator
Pricing New Products:
Before launching a product, use this to see if your planned price delivers enough margin to sustain your business.
Profitability Checks:
Already selling? Input your current costs and prices to see if you're actually making money after all expenses.
Comparing Products:
Calculate margins for different items to identify which products are worth promoting vs phasing out.
Discount Planning:
Before offering a sale, check if a discount still leaves acceptable margin. A 50% off sale on a 40% margin item means you're selling at a loss.
Supplier Negotiations:
When a supplier raises prices, instantly see how it impacts your margin and whether you need to raise your own prices.
Freelancers:
If you charge per project, calculate your margin to ensure your pricing covers your time plus all business costs.
Frequently Asked Questions
Can profit margin be over 100%?
No. Margin is profit divided by selling price, so it's capped at 100% (which would mean zero cost). Markup can exceed 100%, but margin cannot. If someone claims a "150% margin," they're actually talking about markup.
What's a good profit margin for my business?
It varies by industry. Software and digital products: 70-90%. Consulting/services: 40-60%. Retail products: 30-50%. Restaurants/food: 10-20%. Manufacturing: 20-40%. Compare yourself to similar businesses in your specific sector, not across industries.
Should I include taxes in my cost?
No. Calculate margin on pre-tax numbers. If you're VAT-registered, work with net prices (excluding VAT). Taxes are passed through to customers or government, not part of your business margin.
What if I have variable overhead per unit?
Use the overhead field! For example, if payment processing is 3% and shipping is £2, and you sell for £50: Overhead = (£50 × 0.03) + £2 = £3.50 per unit. Input that in the overhead field.
How often should I recalculate my margins?
Check margins quarterly at minimum, and immediately when: (1) Supplier prices change, (2) You change your pricing, (3) You add new costs (software, staff), or (4) Your sales volume changes significantly (volume changes per-unit overhead).
My margin is negative—what now?
You're losing money on each sale. Options: (1) Raise prices, (2) Reduce costs (better suppliers, efficiency), (3) Cut overhead, or (4) Stop selling that product. Don't try to "make it up in volume"—that just loses money faster.