Plot No. 68 · Business & Work
Profit Margin Calculator
Work out the profit, profit margin and markup on a sale. Profit is sale price minus cost. Profit margin is profit divided by the sale price, shown as a percentage. Markup is the same profit divided by the cost, which is always the larger figure.
Margin is profit as a share of the price. Markup is the same profit as a share of the cost, so it is always the larger of the two.
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How profit margin and markup are worked out
The calculator starts from a known cost and sale price. Profit is simply the sale price minus the cost. Profit margin is that profit divided by the sale price and shown as a percentage, so it answers what share of each sale you keep.
Markup is the same profit divided by the cost instead of the price. Because the cost is the smaller number, markup always comes out higher than the margin for the same sale. Seeing both side by side stops the common mix-up between the two.
How to use the profit margin calculator
- Enter the cost of the item in pounds.
- Enter the sale price you charge in pounds.
- Read off the profit, the profit margin and the markup, and compare margin with markup to see the gap.
Worked examples
Retail item
Inputs: Cost £40, sale price £100
Result: £60 profit, a 60 percent margin and a 150 percent markup, the classic example of the two figures diverging.
Thin-margin product
Inputs: Cost £80, sale price £100
Result: £20 profit, a 20 percent margin but a 25 percent markup, showing how the gap narrows as price approaches cost.
Limitations and common mistakes
Edge cases and limitations
- It uses a single unit cost and price, so it does not deduct VAT, payment fees, shipping or returns from the profit.
- Margin is undefined when the price is zero and markup is undefined when the cost is zero, so both inputs need a real value.
- It measures gross profit on one sale, not the net profit of the whole business after overheads.
Common mistakes
- Pricing to a 50 percent markup while believing it gives a 50 percent margin, when the margin is actually lower.
- Treating gross margin as take-home profit and ignoring fees and overheads that eat into it.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a share of the sale price. Markup is the same profit as a share of the cost. A £40 item sold for £100 makes £60 profit, which is a 60 percent margin but a 150 percent markup.
How do I calculate profit margin?
Subtract cost from sale price to get profit, then divide profit by the sale price and multiply by 100. £60 profit on a £100 sale is 60 divided by 100, which is a 60 percent margin.
I know the markup I want, how do I find the price?
This tool works from a known cost and price. If you instead know the cost and the markup percentage and want the selling price, use the markup calculator, which solves the price from the markup you set.
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Related guides
Margin vs Markup: The Difference (With Examples)
Markup is profit over cost; margin is profit over price. See the conversion table, worked GBP examples, and how to price from a target margin.
Free Shopify profit margin calculator alternative
How Calc Garden's free, no-signup profit margin calculator compares to the Shopify profit margin calculator, with an honest feature table and where each one wins.