Business & Finance
Profit Margin Calculator
Margin is profit measured against the price you charge, which is what determines whether a job or product actually pays. Enter revenue and cost to see the margin you are running — and if you have a target in mind, the price that would reach it.
Estimates only. Verify important figures against your own records before acting on them. See our disclaimer.
What this calculator includes
What you enter
- Revenue (selling price)
- Cost of goods or job cost
- Target margin (optional)
What you get back
- Gross margin
- Gross profit
- Equivalent markup
- Cost as a share of revenue
- Price needed for a 40% margin
- Change from current price
How this calculation works
How this calculation works
Margin and markup use the same profit but different denominators, which is the single most common pricing mistake in small business. Margin divides by price; markup divides by cost.
- Gross profit = revenue − cost
- Gross margin % = gross profit ÷ revenue × 100
- Equivalent markup % = gross profit ÷ cost × 100
- Price for a target margin = cost ÷ (1 − target margin ÷ 100)
What the result means
Gross margin is profit as a share of the price you charge, which is what tells you whether a job pays. The equivalent markup is the same profit measured against cost, and the target-margin price is what you would need to charge on the same cost.
Common mistakes and assumptions
- Quoting a markup percentage and reading it as margin — margin is always the smaller number.
- Leaving labor, delivery, or payment fees out of cost, which overstates margin.
- Judging a business on gross margin alone; overhead is not included here.
Worked example
A job that bills $8,400 with $5,600 of direct cost, against a 40% margin target.
- 1Gross profit = $8,400 − $5,600 = $2,800.
- 2Gross margin = $2,800 ÷ $8,400 × 100 = 33.33%.
- 3Equivalent markup = $2,800 ÷ $5,600 × 100 = 50%.
- 4Price for a 40% margin = $5,600 ÷ (1 − 0.40) = $9,333.33.
- 5So hitting 40% means charging $933.33 more than the current price.
Frequently asked questions
- Is margin the same as markup?
- No. A 50% markup on cost produces only a 33.3% margin on price. Quoting margin when you meant markup systematically underprices work.
- Why can't margin reach 100%?
- Margin equals profit divided by price, and profit can never exceed price unless cost is zero. A 100% margin would mean the item cost you nothing.
- Should overhead go in the cost field?
- For gross margin, no — use direct costs only. If you want a margin that covers rent, insurance, and admin, allocate a share of overhead into the cost, but call the result something other than gross margin so comparisons stay honest.
- What margin should I target?
- It is industry-specific. What matters is that your margin covers overhead and leaves net profit; run your fixed costs through the break-even calculator to find the floor.
Disclaimer
This calculator returns estimates based only on the values you enter. It does not account for taxes, financing terms, local regulations, or conditions specific to your operation, and it is not accounting, legal, tax, or investment advice. Confirm any figure that carries real cost before you rely on it.
Calculations run entirely in your browser and the numbers you type are never sent to us or stored. Read how Answerivo calculators are built.
Formulas and worked example last reviewed .