How to calculate profit margin
Profit margin is your profit as a percentage of the selling price. It tells you how much of each sale you actually keep. Divide the profit by the price and multiply by 100. This calculator shows the margin along with the profit and the equivalent markup.
The profit margin formula
Margin % = (price - cost) / price x 100. Profit = price - cost.
Worked example
Buy for 80, sell for 100, and your profit is 20. As a share of the 100 price that is a 20% margin. The same deal is a 25% markup on cost.
Margin vs markup
Margin is always smaller than the matching markup, because the price is bigger than the cost. Reporting profitability is done in margins; pricing up from cost is done in markup. See the markup vs margin guide for the full picture.
Frequently asked questions
What is the profit margin formula?
Subtract cost from price to get profit, divide by the price, and multiply by 100. Profit of 20 on a 100 price is a 20% margin.
What is a good profit margin?
It varies by industry. Retail often runs on thin margins while software can be very high. Compare against typical figures for your sector.
Why is margin lower than markup?
Margin divides profit by the larger selling price, markup by the smaller cost, so margin is always the smaller percentage.
Can margin be negative?
Yes. If you sell below cost, profit and margin are negative, meaning a loss on each item.