Profit Margin Calculator

What is a Profit Margin?

Profit margin is a critical financial metric that reflects how much profit a business earns relative to its revenue. Typically expressed as a percentage, it shows a business’s efficiency in generating profits. For example, a 30% profit margin means your business retains $30 for every $100 of revenue.

How to Calculate Profit Margin

Follow these steps to calculate profit margin manually:

1. Determine the Cost (COGS): For example, $30.
2. Identify Revenue (Selling Price): For example, $50.
3. Calculate Gross Profit: Subtract the cost from revenue: $50 – $30 = $20.
4. Compute Margin: Divide gross profit by revenue and multiply by 100: ($20 / $50) × 100 = 40%.

For instant calculations, try our Profit Margin Calculator!

Formula for Gross Profit Margin

The standard formula for profit margin is:
Alternatively, use:

Our tool simplifies this process, allowing you to calculate your margin, revenue, or costs effortlessly.

Margin vs. Markup: Key Differences

Though similar, margin and markup differ in context:

• Margin is the percentage of profit based on revenue.
• Markup is the percentage of profit based on cost.

For example:

• If an item costs $30 and sells for $50:
  • Margin: (50−30)/50=40%
  • Markup: (50−30)/30=66.7%

Use our Profit Margin Calculator to get both values in seconds!

FAQs

1. What is a good profit margin?
   A good margin varies by industry but typically ranges from 10-20% for most businesses. Higher margins indicate more room for growth.
2. How do I calculate a 30% profit margin?
   Divide the cost by 1−0.31 – 0.31−0.3 to get the selling price.
3. What’s the difference between gross and net profit margins?
   Gross margin is profit before expenses, while net margin includes all costs like rent, salaries, and taxes.
4. Can profit margins be too high?
   Excessive margins may hinder reinvestment and long-term growth. It’s best to balance profitability with reinvestment.
5. What is the formula for revenue with a set profit margin?
   Revenue = Cost÷(1−Profit Margin)Cost÷(1−Profit Margin).

Why Use Our Profit Margin Calculator?

Our tool is designed to simplify complex calculations. Input any two values (cost, revenue, profit, or margin), and let the calculator do the rest. Whether you’re pricing products or assessing business health, this tool helps you make data-driven decisions with ease.