BCBetter Calculators

Margin Calculator

Calculate profit margin based on revenue and cost.

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Enter your values and click Calculate

How It Works

Profit margin measures how much of each dollar of revenue you keep as profit. The formula is: Margin (%) = (Revenue − Cost) ÷ Revenue × 100. First, gross profit is calculated by subtracting the cost from revenue. That profit is then divided by revenue — not by cost — and multiplied by 100 to express it as a percentage. This is the critical distinction between margin and markup: margin uses revenue as the denominator while markup uses cost. The calculator also outputs the cost ratio, which is the percentage of each revenue dollar consumed by costs. A 40% margin means for every $1 earned, $0.40 is profit and $0.60 covers costs. Higher margins indicate more efficient pricing or lower production costs relative to selling price.

Examples

Product selling for $1,000 with $600 cost
A typical retail or wholesale scenario.
Result: 40% profit margin, $400 gross profit.
Service priced at $250 with $80 cost
A service business with low direct costs.
Result: 68% profit margin, $170 gross profit.
Wholesale order: $5,000 revenue, $3,800 cost
A lower-margin wholesale transaction typical of commodity goods.
Result: 24% profit margin, $1,200 gross profit.

Frequently Asked Questions

What is a good profit margin?
It depends heavily on the industry. Retail businesses often operate at 5–20% net margins, while software and SaaS companies can see 60–80% gross margins. As a general rule, a gross margin above 50% is considered strong for most businesses, but always compare against industry benchmarks.
What is the difference between margin and markup?
Margin is profit expressed as a percentage of revenue, while markup is profit expressed as a percentage of cost. For the same transaction, markup will always be a higher percentage than margin. For example, buying for $60 and selling for $100 gives a 40% margin but a 66.7% markup.
How do I use margin to set a selling price?
If you know your cost and target margin, use: Selling Price = Cost ÷ (1 − Margin). For a 40% margin on a $60 cost: $60 ÷ (1 − 0.40) = $100. This differs from a markup calculation, which would give $60 × 1.40 = $84 — a common and costly pricing mistake.

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