Profit Margin Calculator

Profit margin and markup describe the same profit from two different angles, and confusing them is one of the most expensive mistakes in business. Both start with the same profit — selling price minus cost — but they divide it by different numbers. Margin divides profit by the selling price; markup divides profit by the cost.

Take an item that costs $60 and sells for $100. The profit is $40. The margin is $40 ÷ $100 = 40%. The markup is $40 ÷ $60 = 67%. Same sale, same profit, two very different percentages. Markup is always the larger number because cost is always smaller than price. A supplier quoting "50% markup" is offering a very different deal than one quoting "50% margin."

This matters most when setting prices to hit a target margin. The instinct is to take your cost and add the margin percentage — cost $60, want 40%, so charge $84. But $84 on a $60 cost is only a 28.6% margin, not 40%. The correct formula is price = cost ÷ (1 − margin), which gives $60 ÷ 0.60 = $100. The "target margin" mode above does this correctly so you never under-price by accident.

One useful sanity check: margin can never reach 100% (that would require zero cost), but markup has no ceiling. An item costing $10 and selling for $50 has an 80% margin but a 400% markup. Whenever you see a "margin" above 100%, someone has almost certainly mislabelled a markup — exactly the kind of error that clear calculation prevents.