Margin Calculator

Gross Profit Margin vs. Net Profit Margin

Our Margin Calculator uses gross profit margin by default, which means it only considers cost of goods sold (COGS) and revenue. It doesn’t include overhead expenses like rent, salaries, or taxes.

Gross Profit Margin Formula:

Profit Margin (%) = (Revenue − Cost) ÷ Revenue × 100

Net Profit Margin, on the other hand, accounts for all business expenses. If you want to calculate it, check out the Profit Margin Calculator.

Why Profit Margin Matters

Profit margin is more than just a number—it’s a performance metric. Businesses use it to measure:

• Efficiency – How well costs are controlled relative to sales
• Pricing strategy – Whether selling price is set high enough to cover costs and profit goals
• Financial health – Whether the company can sustain operations

For example, if your cost of production increases but revenue remains the same, your margin decreases. To fix this, you could:

• Raise your markup (though risk losing price-sensitive customers), or
• Keep prices stable and increase sales volume through marketing.

The right choice depends on your business strategy.

Margin Formulas You Need to Know

Here are the plain-text formulas used by the Margin Calculator, explained with examples:

1. Profit = Revenue − Cost
2. Revenue = Cost + Profit
3. Profit Margin (%) = (Profit ÷ Revenue) × 100
4. Markup (%) = (Profit ÷ Cost) × 100

These formulas are the backbone of margin calculations. Let’s apply them step-by-step.

Margin Calculation Examples

1. Calculate Margin Given Profit and Revenue

Formula: Profit Margin (%) = (Profit ÷ Revenue) × 100

• Profit = $30
• Revenue = $150
• Margin = (30 ÷ 150) × 100 = 20%

2. Calculate Margin Given Profit and Cost

Formula: Profit Margin (%) = (Profit ÷ (Profit + Cost)) × 100

• Profit = $25
• Cost = $100
• Revenue = 100 + 25 = $125
• Margin = (25 ÷ 125) × 100 = 20%

If you’d like to explore different selling prices, the Price Calculator can help you quickly test scenarios.

3. Calculate Margin Given Profit and Markup %

Formula: Margin = (Markup ÷ (1 + Markup)) × 100

• Profit = $125
• Markup = 43% = 0.43
• Margin = (0.43 ÷ 1.43) × 100 = 30.07%

Notice that profit itself doesn’t change the markup–margin relationship.

4. Calculate Margin Given Cost and Revenue

Formula: Margin = ((Revenue − Cost) ÷ Revenue) × 100

• Cost = $80
• Revenue = $100
• Margin = (20 ÷ 100) × 100 = 20%

To plan future revenue targets, use the Sales Calculator.

5. Calculate Margin Given Cost and Markup %

Formula: Margin = (Markup ÷ (1 + Markup)) × 100

• Cost = $80
• Markup = 50% = 0.50
• Margin = (0.50 ÷ 1.50) × 100 = 33.33%

Again, cost doesn’t affect the markup–margin relationship.

6. Calculate Margin Given Revenue and Markup %

Formula: Margin = (Markup ÷ (1 + Markup)) × 100

• Revenue = $125
• Markup = 25% = 0.25
• Margin = (0.25 ÷ 1.25) × 100 = 20%

This shows revenue doesn’t change the relationship either.

Using the Margin Calculator for Business Strategy

Margins aren’t just math—they’re decision tools. Businesses use margin analysis to:

• Set pricing strategies – Deciding whether to compete on cost or premium pricing
• Forecast profits – By combining with tools like the Profit Goal Calculator
• Compare products – Higher margin products might deserve more marketing investment

A healthy margin depends on your industry. Grocery stores, for example, often operate on thin margins (2–5%) but rely on high sales volume. Luxury brands, in contrast, may enjoy margins above 60%.

Key Takeaways

• Margin (Profit Margin) = Profit ÷ Revenue × 100
• Markup = Profit ÷ Cost × 100
• Cost, revenue, profit, and markup are all interconnected, and knowing two values lets you calculate the rest.
• Margins shrink if costs rise without an increase in revenue.
• Our Margin Calculator makes the process automatic so you can focus on strategy, not math.

For deeper analysis, combine it with the Profit Calculator to see how changes in cost and sales volume affect your bottom line.

The Margin Calculator is more than just a math tool—it’s a way to understand the health and sustainability of your business. By mastering margin, markup, and related financial metrics, you can price smarter, maximize profitability, and achieve long-term financial goals.

If you’re planning to optimize pricing or forecast sales, don’t stop here. Explore related tools like the Profit Margin Calculator and Price Calculator to gain full control over your numbers.