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Profit Margin Calculator — Calculate Gross Margin, Markup & Cost

Last verified May 2026 — runs in your browser
Calculate profit margin and markup
Profit
$60
Margin %
60%
Markup %
150%
Use this result in: Tax VAT Discount

Margin vs. Markup

Profit Margin = (Profit / Revenue) × 100

Markup = (Profit / Cost) × 100

Margin is always lower than markup for the same transaction. Margin is based on revenue; markup is based on cost.

Margin %: (60 / 100) × 100 = 60% • Markup %: (60 / 40) × 100 = 150%

Profit Margin Calculator — Gross Margin, Markup vs Margin & Cost

Type your cost and revenue (or selling price) and the page returns the absolute profit, the gross margin percentage, AND the equivalent markup percentage — so you can compare apples to apples whether you think in margin terms (the % of revenue that's profit) or markup terms (the % added to cost to reach the price). Useful for product-pricing decisions, freelance project quotes, restaurant menu engineering, e-commerce SKU profitability audits, retail buyer's margin analysis, and SaaS gross-margin reporting. The margin-vs-markup distinction matters: a 50% margin product has a 100% markup, a 33% margin product has a 50% markup, and confusing them in either direction misprices an entire product line.

Related: Markup Calculator Percentage Change X is What % of Y Discount Calculator Sales Tax Calculator VAT Calculator
About this tool

Margin (gross): margin = (revenue − cost) / revenue × 100. So a product costing $40 sold for $100 has $60 profit and a 60% margin. Markup: markup = (revenue − cost) / cost × 100. The same product has a 150% markup. Both numbers describe the same transaction; they're different fractions because they use different denominators (revenue for margin, cost for markup). Industry conventions: retail and e-commerce typically discuss markup (what gets added to wholesale to set the shelf price); finance and SaaS report margin (what fraction of revenue is profit); restaurants use both depending on whether they're talking food cost (markup) or operating margin (margin). Common reference margins: SaaS gross 70-90%, restaurants 67-75% on food (operating margin closer to 5-15% after labour and rent), grocery 25-30%, gas station 5-10% on fuel itself, jewelry 50%+, software 80-95%, generic e-commerce 30-50%. The tool also reverses gracefully: enter cost + target margin and back-solve the required revenue. Critical for entrepreneurship, freelance pricing, retail buying, and any moment you're sizing what a product needs to cost to make money. Estimate only — not financial or tax advice; consult a qualified accountant before relying on these numbers for pricing, accounting, or business decisions.

  • Computes profit + margin % + equivalent markup % in one view
  • Distinguishes margin (% of revenue) from markup (% of cost)
  • Documents typical margins by industry (SaaS, retail, restaurant, etc.)
  • Reverse mode: enter cost + target margin, get required revenue
  • Step-by-step formula breakdown shown under the result
  • Reactive — recalcs as you tune cost or revenue
  • Decimal inputs supported (precision unit costs)
  • Copy result with one click
  • Useful for product pricing, SaaS reporting, retail buyer analysis, freelance quotes
  • Pairs with markup-calculator for the cost+markup → price direction

Free. No signup. Your inputs stay in your browser. Ads via Google AdSense (consent required).

Frequently asked questions

What's the gross profit margin formula and how does it differ from markup?

Gross profit margin = (revenue − cost) / revenue × 100. So a product costing €40 sold for €100 yields €60 profit and 60% margin. The matching markup is (revenue − cost) / cost × 100 = 60/40 = 150% — same transaction, different denominator (revenue for margin, cost for markup). The reverse formula: margin = markup / (1 + markup/100). For a 100% markup (keystone): margin = 100/2 = 50%. For 150% markup: margin = 150/2.5 = 60%. The sister markup-calculator handles the inverse direction explicitly. Standard textbook treatment: Brealey/Myers/Allen/Edmans, Principles of Corporate Finance 15th ed (2025), Chapter 29 "Financial Analysis".

What are typical gross margins by industry?

Software-as-a-Service: gross 70-90% (marginal cost of an additional user near zero). Retail apparel: ~50% (keystone 100% markup on cost). Jewellery: 50%+. Grocery / supermarket: 20-23% (high volume, low margin). Electronics: 9-17% (commoditised). Restaurants: 67-75% on food cost (operating margin much lower 5-15% after labour + rent); restaurant alcohol 80-83%. Consulting services: 50%+ (labour-only cost base). Manufacturing distributors: 20-33%. Petrol stations: 5-10% on fuel itself, higher on convenience items. Per Levy/Weitz/Grewal, Retailing Management 11th ed (2023), Ch 14 "Retail Pricing" + Brealey 15th ed (2025), Ch 29.

How do gross, operating, and net margin differ on an income statement?

Income statement reads top-to-bottom from revenue downward. Gross margin = (revenue − COGS) / revenue × 100 — captures direct unit-cost efficiency; SaaS gross 70-90%, retail 25-50%. Operating margin = (revenue − COGS − SG&A − R&D) / revenue × 100 — adds operating expenses; SaaS operating typically 0-30%, restaurants 5-15%. Net margin = net income / revenue × 100 — subtracts everything including interest, tax, one-time items; SaaS net often negative growth-stage, retail 2-5%. Under US GAAP, ASC 606 Revenue from Contracts with Customers (FASB, effective public companies fiscal years after 15 December 2017) governs when revenue is recognised — affecting gross margin computation directly. Converged with IFRS 15 (IASB) for cross-border comparability.

How do you back-solve cost from target margin and revenue?

Reverse formula: cost = revenue × (1 − margin/100). For €100 revenue at target 60% margin: cost = 100 × 0.40 = €40 max cost. For 50% margin: cost = €50. For 30% margin: cost = €70. The reverse mode is critical for buyer/merchandiser teams negotiating wholesale costs that must support a category-level margin target — a 30% gross margin objective at €100 retail price caps acceptable wholesale cost at €70. Common pricing-strategy error: confusing this with the markup back-solve (markup = margin / (1 − margin/100) — for 30% margin = 42.9% markup, NOT 30%); the markup-calculator covers that direction explicitly.

Why do investors and SaaS metrics focus on 70-90% gross margin?

SaaS gross margin 70-90% is the threshold growth-stage investors (Bessemer Venture Partners Cloud Index, Battery Ventures OpenCloud) expect — sub-70% suggests material infrastructure / customer-support cost not amortising at scale; above 90% may signal under-investing in customer success. The "Rule of 40" (growth rate % + free cash flow margin % ≥ 40%) became standard SaaS health metric mid-2010s, popularised by Brad Feld and Bessemer's cloud benchmarks. Comparison points: Microsoft Cloud gross ~70%, AWS gross ~60% (operating ~36%, lower than software-only peers because of hardware capex), Salesforce gross ~75%, Shopify gross ~50% (e-commerce is more capital-intensive than pure SaaS). The margin-calculator surfaces the gross figure directly; operating + net require pulling SG&A + tax data the calculator doesn't have.

Sources (5)
  • International Organization for Standardization (2022). ISO 80000-1:2022 — Quantities and units, Part 1: General; defines the percent symbol % as a dimensionless ratio (1 % = 0.01) underlying both margin (denominator = revenue) and markup (denominator = cost) arithmetic; foundational for the (revenue − cost) / revenue × 100 formula. ISO Technical Committee 12 (TC 12) Quantities and units; supersedes ISO 80000-1:2009 + ISO 31-0.
  • Brealey, R., Myers, S., Allen, F., & Edmans, A. (2025). Principles of Corporate Finance, 15th edition — Chapter 29 "Financial Analysis" defines gross profit margin = (revenue − COGS) / revenue × 100, operating margin (EBIT/revenue), net margin (net income/revenue); income-statement positioning from gross to operating to net; the textbook standard for distinguishing margin types and from markup-on-cost. McGraw-Hill Education, 2025; canonical corporate finance textbook used in MBA + CFA programmes.
  • Levy, M., Weitz, B. A., & Grewal, D. (2023). Retailing Management, 11th edition — Chapter 14 "Retail Pricing" documents typical industry margins (apparel ~50% gross margin = 100% markup; jewelry 50%+; grocery 20-23% = 25-30% markup; restaurants 67-75% on food = 200-300% markup; SaaS gross 70-90%); also documents margin vs markup confusion as a recurring small-business pricing error. McGraw-Hill Education, 2023; canonical retail-management textbook.
  • Financial Accounting Standards Board (FASB) (2014). ASC 606 Revenue from Contracts with Customers (FASB Accounting Standards Codification, Topic 606; effective for public companies fiscal years beginning after 15 December 2017, private companies after 15 December 2018) — successor to ASC 605; five-step revenue recognition framework affecting gross margin computation (when revenue is recognised vs deferred); converged with IFRS 15 (IASB). Financial Accounting Standards Board, US GAAP Accounting Standards Codification Topic 606; converged with IASB IFRS 15.
  • World Wide Web Consortium (W3C) (2018). Web Content Accessibility Guidelines (WCAG) 2.1 — Success Criterion 4.1.3 Status Messages. W3C Recommendation 5 June 2018; carried unchanged into WCAG 2.2 (Recommendation 5 October 2023).

These are the original publications the formulas in this tool are based on. Locate them by journal name and year on Google Scholar or PubMed.