How to use the profit margin calculator
- Choose what you know: cost and price, cost and target margin, cost and markup, or price and margin.
- Enter the numbers. Cost should include everything it takes to get the product ready to sell: purchase price, inbound shipping and packaging.
- Optionally enter the number of units to see total revenue and total profit.
The formulas
Profit = Price − Cost Margin = Profit ÷ Price × 100 Markup = Profit ÷ Cost × 100 Price from margin = Cost ÷ (1 − Margin) Price from markup = Cost × (1 + Markup)
Worked example
You buy a product for $60 and sell it for $100:
- Profit = $100 − $60 = $40
- Margin = 40 ÷ 100 = 40%
- Markup = 40 ÷ 60 = 66.7%
If you wanted a 50% margin instead, the price would be 60 ÷ 0.5 = $120.
Margin vs markup table
| Margin | Equivalent markup | Price for a $10 cost |
|---|---|---|
| 10% | 11.1% | $11.11 |
| 20% | 25% | $12.50 |
| 25% | 33.3% | $13.33 |
| 30% | 42.9% | $14.29 |
| 40% | 66.7% | $16.67 |
| 50% | 100% | $20.00 |
| 60% | 150% | $25.00 |
| 75% | 300% | $40.00 |
The most common pricing mistake
Many sellers add a percentage to cost and think of it as their margin. Adding 30% to a $10 cost gives $13, but the margin is only 3 ÷ 13 = 23%. If your business needs a 30% margin to cover overheads, you must charge $14.29, not $13. Always decide on the margin first and work the price out with Cost ÷ (1 − Margin).
Remember all the costs
- Marketplace and payment fees: Amazon, Etsy, eBay, Shopify Payments and card processors take a percentage of the price, which lowers your real margin.
- Shipping and returns: free shipping is a cost you pay; returns and damaged stock reduce average profit.
- Discounts: a 20% off sale on a product with a 40% margin cuts profit per unit in half.
- Overheads: rent, wages and software are covered by gross profit — use the break-even calculator to see how many units you need to sell.
Using margin to price services
The same maths works for freelancers and service businesses. Treat your cost as the time you spend multiplied by the hourly pay you want, plus any materials or subcontractors, then add the margin needed for unbilled time, software, insurance, taxes and profit. A designer who wants $40 an hour for 10 hours of work and a 35% margin should quote 400 ÷ 0.65 = $615, not $400 plus 35% ($540). Checking the margin on each quote before you send it avoids jobs that keep you busy but earn little, and makes it easy to see how much room you have to offer a discount.