What is the difference between margin and markup?

Margin expresses profit as a percentage of revenue. Markup expresses profit as a percentage of cost. A 50% markup on a cost of 100 gives a selling price of 150 and a margin of about 33%, so the two figures are never interchangeable.

Can profit margin be negative?

Yes. If total cost exceeds revenue, the margin is negative, meaning the sale loses money. A negative margin is a valid result and should be read as a loss, not an error.

Is a higher profit margin always better?

Not necessarily. A very high margin may indicate strong pricing power, but it can also mean volume is low or pricing is suppressing demand. Appropriate margins vary significantly by business and industry, so compare against peers rather than a universal benchmark.

Should tax be included in revenue?

Sales tax and VAT collected on behalf of a tax authority are normally excluded from revenue because they are not your income. Income or corporation tax is only relevant if you are calculating a post-tax net margin.

Does this calculator store my financial data?

No. All calculations run locally in your browser. Your figures are not sent to a server, database, analytics service, or external API.

Profit Margin Calculator

Profit margin shows how much of every unit of revenue you keep after costs. Enter your revenue and costs to see the margin percentage and the profit amount, then use the explanation below to understand which margin type fits your situation.

Last reviewed: 2026-07-01

Profit Margin Calculator inputs

Fill in the fields below, then select Calculate. Nothing is submitted automatically.

Revenue

Total sales value before costs are deducted.

Total Cost

Cost of goods for gross margin, or total costs for net margin — use one definition consistently.

Units Sold (optional)

Used to calculate profit per unit. Leave empty to skip.

Currency

Changing the currency changes formatting only. It does not convert values between currencies.

Calculations run locally in your browser. Your figures are not sent to a server or stored by us.

Results

Enter your figures above and select Calculate. Results appear here with clear labels — never colour alone.

What is profit margin?

Profit margin expresses profit as a percentage of revenue. It answers a single question: out of every unit of money a customer pays you, how much do you keep after costs? Because it is a percentage, it lets you compare a small product line against a large one, or this quarter against last, without the comparison being distorted by size.

There are three margins in common use, and they differ only in which costs are subtracted. Gross margin subtracts the direct cost of what you sold. Operating margin also subtracts running costs such as salaries, rent and software. Net margin subtracts everything, including interest and tax. All three use the same formula; the discipline is in choosing one cost definition and applying it consistently.

Profit margin formula

Profit = Revenue − Total Cost
Profit Margin (%) = (Profit ÷ Revenue) × 100
Cost Percentage (%) = (Total Cost ÷ Revenue) × 100
Markup (%) = (Profit ÷ Total Cost) × 100

Note the denominator in each line: margin divides by revenue, markup divides by cost. Dividing by cost instead of revenue produces markup, a different and larger number, which is the single most frequent source of pricing errors.

Worked example

A studio invoices $10,000 for a project. Contractor fees and software licences directly attributable to the work total $6,500.

Profit = 10,000 − 6,500 = 3,500
Profit Margin = (3,500 ÷ 10,000) × 100 = 35.00%
Cost Percentage = (6,500 ÷ 10,000) × 100 = 65.00%
Markup on Cost = (3,500 ÷ 6,500) × 100 ≈ 53.85%

The studio keeps 35% of the invoice value before overheads. If office rent and salaries of $2,000 are then included as operating costs, profit falls to $1,500 and the operating margin becomes 15%.

How to calculate profit margin

Decide which margin you want — gross, operating or net.
Enter total revenue for the period or the single sale you are analysing.
Enter the total cost figure that matches that margin type, using the same period and the same inclusions.
Optionally enter units sold to see profit per unit.
Choose your display currency if you want results formatted differently.
Select Calculate. Nothing is submitted until you do.

Values pasted with commas or currency symbols are accepted, and decimals are supported. Your figures stay in your browser.

How to interpret the result

Read the percentage together with the profit amount. A 60% margin on a $40 sale and a 12% margin on a $4,000 sale are very different businesses, and only the pair of numbers tells the story. A rising margin usually means better pricing, cheaper inputs or a shift towards more profitable products; a falling margin often reflects discounting, rising supplier costs or fee creep from payment processors and marketplaces.

The calculator uses neutral labels — Negative Margin, Low Positive Margin, Positive Margin — rather than calling a result "good" or "bad", because appropriate margins vary significantly by business and industry. A 10% margin is strong in grocery retail and weak in software; the number only means something next to its context.

If the result is negative, the sale costs more than it earns. Before changing price, check whether a cost has been included that belongs in a different margin type — for example counting overheads inside a gross margin calculation.

Common profit margin mistakes

Confusing margin with markup. Use the markup calculator when you are building a price up from cost.
Mismatched periods. Monthly revenue against annual costs produces a meaningless figure.
Forgetting transaction fees. Payment processing, marketplace commission and refunds are real costs of the sale.
Including sales tax in revenue. Tax collected for an authority is not your income.
Judging viability on margin alone. Volume matters too — check your break-even point to see how many sales that margin needs to cover fixed costs.

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Disclaimer

Results from this calculator are estimates for general information only and are not financial, accounting, tax, investment or legal advice. Verify important figures with a qualified professional. Read our full disclaimer.