Profit Margin Calculator
Calculate your profit margin percentage, markup percentage, and profit amount. Essential for pricing strategies and understanding your business profitability.
Cost
What you pay for the product/service
Selling Price
What you charge to the customer
What is Profit Margin?
Profit margin is a profitability ratio that measures how much profit you make for each dollar of sales. It's expressed as a percentage and is calculated by dividing profit by revenue (selling price).
The Profit Margin Formula
Profit Margin % = (Profit / Selling Price) × 100
Where: Profit = Selling Price - Cost Price
Profit Margin vs. Markup
Profit Margin is calculated based on the selling price (revenue), while Markup is calculated based on the cost. They are related but different metrics:
- Profit Margin % = (Profit / Selling Price) × 100
- Markup % = (Profit / Cost) × 100
Example: If you buy for $50 and sell for $100, your profit is $50. Your margin is 50% ($50/$100), but your markup is 100% ($50/$50).
Typical Profit Margins by Industry
- Retail: 2-5% (grocery) to 40-50% (jewelry, clothing)
- Restaurants: 3-5% (fast food) to 10-15% (fine dining)
- Software/SaaS: 70-90%
- Manufacturing: 10-25%
- Service businesses: 15-50%
Using Profit Margin Analysis
- Set competitive yet profitable prices
- Compare profitability across products
- Identify which products/services are most profitable
- Make informed decisions about discounts
- Track business health over time
Important Disclaimer
This calculator provides estimates for educational and informational purposes only. Results should not be considered as financial or business advice. Actual profit margins may vary based on overhead costs, volume discounts, seasonal factors, and market conditions not accounted for in this simple calculation.
Always consult with a qualified accountant, financial advisor, or business consultant before making critical pricing and business decisions.