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Profit Margin Calculator

How much do you really make on each sale? This calculator shows the profit margin, the markup and the profit of a product or service from its cost and selling price. Alternatively, enter the margin you want and find the price to charge. It is the tool for understanding the often-confused difference between margin and markup.

Profit margin is measured on the selling price; markup is measured on the cost. That is why a 40% margin is a 66.67% markup, not 40%. Use amounts excluding VAT.

Profit margin
40%

How the result is reached

Selling price€100.00
Cost of the product€60.00
Profit€40.00
Profit margin (on the price)40%
Markup (on the cost)66.67%

Educational estimate, not financial advice. It works out the gross margin of one product (price minus cost); it does not include business overheads (rent, salaries, taxes), which lower the net margin.

Profit margin vs markup

They are two ways of measuring the same profit, but on different bases. Profit margin measures the profit as a percentage of the selling price: margin = (price − cost) ÷ price. Markup measures the profit as a percentage of the cost: markup = (price − cost) ÷ cost. Because the price is higher than the cost, the markup is always larger than the margin. Mixing them up leads to mispriced products.

Working out the margin from the price

If you already have the cost and the selling price, the profit is the difference (price − cost). The margin is that profit divided by the price, and the markup is the same profit divided by the cost. For example, a product that costs €60 and sells for €100 makes €40 of profit: a 40% margin (40 ÷ 100) and a 66.67% markup (40 ÷ 60).

Working out the price from the margin

If you know you want, say, a 40% margin, the price is not the cost plus 40%. You get the price by dividing the cost by (1 − margin): 60 ÷ (1 − 0.40) = 60 ÷ 0.60 = €100. Just adding 40% to the cost (60 × 1.40 = €84) leaves you with a margin of only 28.6%, well below what you wanted. The calculator does this for you.

Gross margin and net margin

This calculator gives the gross margin of a product: what is left after paying only its direct cost. A business’s net margin is lower, because you still have to cover overheads (rent, salaries, electricity, software, taxes). Use each product’s gross margin as a starting point and make sure that, together, it covers those overheads and still leaves a profit.

Worked example

A shop buys an item for €60 (excluding VAT) and sells it for €100 (excluding VAT). The profit per unit is 100 − 60 = €40. The profit margin is 40 ÷ 100 = 40%, and the markup is 40 ÷ 60 = 66.67%. Notice how the same €40 profit gives two different numbers depending on the base: that is why “working with 40%” has to be clear: a 40% margin means a much higher price than a 40% markup.

Frequently asked questions

What is the difference between profit margin and markup?
Profit margin is the profit as a percentage of the selling price (profit ÷ price); markup is the profit as a percentage of the cost (profit ÷ cost). For the same profit, the markup is always larger. A product with a 40% margin has a 66.67% markup.
How do you calculate the profit margin?
Subtract the cost from the selling price to get the profit and divide it by the selling price: margin = (price − cost) ÷ price. For example, selling for €100 something that costs €60 gives a margin of 40 ÷ 100 = 40%.
What price should I charge to get a certain margin?
Divide the cost by (1 − margin). For a 40% margin on a €60 cost, the price is 60 ÷ 0.60 = €100. Simply adding 40% to the cost would give €84 and a margin of only 28.6%.
Is the margin calculated with or without VAT?
Use amounts excluding VAT, both for the cost and the price. VAT is not yours (it is charged to the customer and handed to the State), so it does not enter the margin calculation. To add or remove VAT from an amount, use the VAT calculator.
Does this calculator give my business’s net margin?
No. It gives the gross margin of each product (price minus its direct cost). The net margin also deducts the business’s overheads (rent, salaries, taxes), which this calculation does not include.

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Author: Thorben Rasmus Idel · Reviewed by: Nahar Geva · Last reviewed: 2026-06-23