Margin Calculator
Calculate profit margin, markup percentage, and gross profit. Perfect for pricing products, understanding profitability, and making informed business decisions.
What is a Margin Calculator?
A margin calculator helps you determine the profit margin and markup on products or services. Profit margin is the percentage of profit relative to the selling price, while markup is the percentage of profit relative to the cost price.
Understanding margins is crucial for pricing strategies, profitability analysis, and making informed business decisions about product pricing and cost management.
How to Use the Margin Calculator
- Enter cost price: Input the cost to produce or purchase the item.
- Enter selling price: Input the price at which you sell the item.
- Calculate: Click "Calculate Margin" to see gross profit, profit margin, and markup percentage.
Understanding Margin vs Markup
Profit Margin
Profit margin = (Gross Profit / Selling Price) × 100. This shows what percentage of your selling price is profit. For example, a 33.33% margin means 33.33% of the selling price is profit.
Markup
Markup = (Gross Profit / Cost Price) × 100. This shows how much you've increased the cost price. For example, a 50% markup means you're selling for 50% more than the cost.
Key Difference
Margin is calculated on the selling price (what you receive), while markup is calculated on the cost price (what you paid). Margin is always lower than markup for the same profit amount.
Frequently Asked Questions
What's a good profit margin?
Profit margins vary by industry. Generally, 10-20% is considered good for most businesses, though some industries have higher margins (software, services) while others have lower margins (retail, manufacturing).
Why is margin different from markup?
Margin and markup use different denominators. Margin uses selling price (shows profit as % of revenue), while markup uses cost price (shows profit as % of cost). This makes margin always appear smaller than markup for the same profit.
How do I calculate selling price from cost and desired margin?
Selling Price = Cost / (1 - Margin/100). For example, if cost is £50 and you want a 30% margin: £50 / (1 - 0.30) = £71.43.
Should I use margin or markup?
Use margin when analyzing profitability relative to sales revenue. Use markup when setting prices based on cost. Both are useful for different purposes in business planning.
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