This margin calculator has two modes. Enter cost and selling price to find the gross margin. Or enter cost and a target margin to find the price you need. Both modes also show the profit and the equivalent markup.
The formula
margin % = (price - cost) / price x 100
markup % = (price - cost) / cost x 100
profit = price - cost
Price for a target margin:
price = cost / (1 - target margin)
If the target margin is 100% or more, the price result is 0.
Worked example
Mode: find the price. Inputs: cost $100, target margin 40%.
- Selling price: $166.67
- Profit: $66.67
- Gross margin: 40%
- Markup: 66.67%
In the other mode, a cost of $100 and a price of $130 give $30 profit, 23.08% margin and 30% markup.
How to read the result
Margin shows how many cents of each dollar of sales you keep before overheads. A higher margin gives more room for rent, tools and unpaid time.
- To reach a 40 percent margin you need a 66.7 percent markup, not 40.
- Compare margins only within the same kind of business. Software, retail and trades differ widely.
- Include every direct cost in the cost field, such as materials, fees and subcontractors.
- Check that your margin still covers your overheads after discounts.
Use the markup calculator when your supplier or team works with markup.
Related tools
- Create the document: Quote generator and Invoice generator
- Read more: Gross profit vs net profit and Pricing your services
- Other calculators: Markup calculator and Invoice discount calculator
Frequently asked questions
- How do I calculate gross margin?
- Subtract the cost from the selling price, then divide the result by the selling price. A cost of $100 and a price of $130 leave $30 profit, which is a 23.1 percent margin.
- How do I find the price for a target margin?
- Divide the cost by one minus the target margin. For a 40 percent margin on a $100 cost, divide 100 by 0.6. The price is $166.67.
- Why is a 100 percent margin not possible?
- A 100 percent margin means the cost is zero. The price formula would divide by zero. The calculator accepts targets up to 99.99 percent and returns zero at 100 or above.
- Is margin the same as markup?
- No. Margin divides profit by the selling price. Markup divides profit by the cost. For the same sale, markup is always the larger number. This tool shows both.
- Is gross margin the same as net profit?
- No. Gross margin only subtracts the direct cost of the item or service. Overheads, tax and your own time are not included. Net profit comes after those costs.