What is a profit margin calculator?
A profit margin calculator turns a cost and a selling price into profit, profit margin and markup. People use it when they want to check whether a price covers the costs they included, compare two pricing ideas, or work backward from a target margin or markup.
This tool is for informational estimates. It does not recommend a price for your industry, and it does not replace accounting, tax or financial advice.
How to calculate profit
Profit is the amount remaining after subtracting the costs included in the calculation from the selling price.
Profit = selling price − effective cost
Effective cost is the base cost plus any optional per-unit amounts you add. If those extras are off, effective cost equals the base cost you entered.
How to calculate profit margin
Profit margin is profit divided by selling price.
Profit margin = (profit ÷ selling price) × 100
With a $50 cost and a $100 selling price, profit is $50 and profit margin is 50%. A negative margin means the price is below the effective cost in this calculation.
How to calculate markup
Markup is profit divided by cost.
Markup = (profit ÷ effective cost) × 100
Using the same $50 cost and $100 selling price, markup is 100%. Markup can be higher than 100% when profit is larger than cost.
Profit margin vs. markup
Margin and markup start from the same profit figure, but they divide by different numbers. They are not interchangeable.
With a $50 cost and a $100 selling price:
- profit is $50;
- profit margin is 50%;
- markup is 100%.
A 50% margin is not the same as a 50% markup. A 50% markup on a $50 cost produces a $75 selling price and a 33.33% margin. Do not treat those percentages as equivalent.
A 100% margin is not possible when cost is positive and the selling price is a finite number, because the formula would divide by zero. Markup can exceed 100%.
A negative margin represents a loss. A negative markup above −100% represents a price below cost that is still greater than zero. Break-even occurs when selling price and effective cost are equal.
How to calculate a selling price from target margin
Convert the target margin to a decimal, then divide effective cost by one minus that decimal.
Required selling price = effective cost ÷ (1 − target margin)
Example: a 50% target margin is 0.50. A $50 effective cost ÷ (1 − 0.50) = $100. The result is the price that produces that margin from the costs you included. It is not a recommended market price.
How to calculate a selling price from target markup
Convert the target markup to a decimal, then multiply effective cost by one plus that decimal.
Estimated selling price = effective cost × (1 + target markup)
Example: a 100% markup is 1.00. A $50 effective cost × (1 + 1.00) = $100. A markup of −100% would produce a price of zero and is invalid in this calculator.
What should you include in product cost?
Include the amount required to produce or acquire one unit. If you turn on additional per-unit costs, you can add transaction fees and other dollar amounts that apply to each unit sold. Those extras become part of effective cost.
This version does not model sales tax, VAT, income tax, payroll tax, percentage-based payment fees, shipping by distance, monthly overhead allocation, inventory, quantity discounts, multiple products, marketplace-specific rules, returns, discounts or chargebacks. Percentage fees charged on the selling price need a different model because the fee depends on the price you are trying to find.
Limitations of this calculator
- Results are estimates based only on the numbers you enter.
- Sales tax is not included.
- VAT is not included.
- Income tax is not included.
- Payroll tax is not included.
- Percentage-based payment processing fees are not included.
- Marketplace percentage fees are not included.
- Shipping is not included unless you type a per-unit amount.
- Labor and overhead are not included unless you type them as per-unit amounts.
- Returns, discounts and chargebacks are not modeled.
- The tool does not recommend a margin for any industry.
Frequently asked questions
What is the difference between profit margin and markup?
Profit margin is profit divided by selling price. Markup is profit divided by cost. They use the same profit amount, but they are different percentages. A 50% margin is not the same as a 50% markup.
How do I calculate profit margin?
Subtract effective cost from selling price to get profit. Divide profit by selling price, then multiply by 100. With a $50.00 cost and a $100.00 selling price, profit is $50.00 and profit margin is 50%.
How do I calculate markup?
Subtract effective cost from selling price to get profit. Divide profit by effective cost, then multiply by 100. With a $50.00 cost and a $100.00 selling price, markup is 100%.
How do I calculate a selling price from a target margin?
Convert the target margin to a decimal, then divide effective cost by one minus that decimal. A 50% target margin uses a denominator of 0.50. A $50.00 cost then requires a $100.00 selling price. A 100% margin is not possible because the denominator would be zero.
Can profit margin be negative?
Yes. A negative profit margin means the selling price is below the effective cost in this calculation. The result is a loss based on the numbers you entered, not a judgment about whether a price is acceptable.
Can markup be higher than 100%?
Yes. Markup can exceed 100% when profit is larger than cost. Margin cannot reach 100% when cost is positive and the selling price is a finite number, because that would require dividing by zero.
Does this calculator include taxes and payment processing fees?
No. It does not add sales tax, VAT, income tax, payroll tax, percentage-based payment fees, marketplace fees, shipping, labor, overhead, returns, discounts or chargebacks unless you type those amounts into the optional per-unit cost fields as dollar amounts.
What costs should I include?
Include the per-unit cost to produce or acquire the item, plus any extra dollar amounts that apply to each unit sold. Percentage fees charged on the selling price need a different model and are not calculated automatically in this version.
Why is a 50% markup not the same as a 50% margin?
A 50% markup on a $50.00 cost produces a $75.00 selling price and a 33.33% margin. A 50% margin on the same cost requires a $100.00 selling price and a 100% markup. The percentages look similar, but they answer different questions.
What is the break-even price?
The break-even price in this calculator is the effective cost. At that price, profit is $0.00 based on the inputs shown. The price covers the costs you included, but it does not create profit from those inputs.
Last reviewed August 23, 2026 (UTC).