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Profit Margin & Markup Calculator
Profit margin and markup are core financial metrics used by businesses, retailers, and entrepreneurs to price products profitably. While margin measures the percentage of revenue that remains as gross profit, markup measures how much you mark up the cost price. Confusing these two metrics can lead to underpricing and financial loss.
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How to Use This Tool Step-by-Step
- Enter your Cost of Goods Sold (COGS).
- Input either your Selling Price, desired Gross Margin %, or Markup %.
- Click Calculate to find revenue, gross profit, margin %, and markup %.
📐 Margin vs Markup Formulas
• Gross Profit = Selling Price (Revenue) - Cost Price • Profit Margin (%) = (Gross Profit ÷ Selling Price) × 100% • Markup (%) = (Gross Profit ÷ Cost Price) × 100% • Selling Price from Margin = Cost ÷ [1 - (Margin % ÷ 100)]
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E-Commerce Pricing Example
If a product costs $40 to manufacture and sells for $60:
1. Gross Profit = 60 – 40 = $20
2. Profit Margin = (20 ÷ 60) × 100 = 33.33%
3. Markup = (20 ÷ 40) × 100 = 50.00%.
📊 Reference Benchmarks & Classification Data
| Cost Price | Desired Margin % | Equivalent Markup % | Required Selling Price |
|---|---|---|---|
| $50.00 | 20% | 25.0% | $62.50 |
| $50.00 | 30% | 42.9% | $71.43 |
| $50.00 | 40% | 66.7% | $83.33 |
| $50.00 | 50% | 100.0% | $100.00 |
❓ Frequently Asked Questions (FAQ)
What is the key difference between profit margin and markup?
Profit margin is based on selling price (revenue), while markup is based on cost. A 50% markup on a $100 cost gives a $150 selling price, which represents a 33.3% profit margin.
What is considered a healthy gross profit margin for a small business?
Healthy profit margins vary by industry: retail typically aims for 30% to 50%, software/SaaS for 70% to 80%, while high-volume grocery or electronics stores operate on 10% to 20%.