Profit Margin Calculator
Work out gross margin, markup and net profit margin — or find the exact selling price you need to hit a target margin.
Note: markup is always higher than margin for the same transaction (except at 0%), because markup divides profit by cost while margin divides profit by selling price.
This answers "if I want to keep X% of every sale as profit, what should I charge?" — the reverse of the first tab.
Gross margin only removes the direct cost of making what you sold. Net margin also removes everything else it takes to run the business — the number that tells you what you actually kept.
A 50% Markup Is Not a 50% Margin — and That Gap Is Where Profit Quietly Disappears
Here's a mistake that shows up constantly in small business pricing: someone buys a product for ₹6,000, adds "50% on top" to get a selling price of ₹9,000, and assumes they're keeping half of every sale as profit. They're not. On a ₹9,000 selling price with ₹6,000 cost, the profit is ₹3,000 — which is 50% of the cost, but only 33.3% of the selling price. That second number is the gross margin, and it's the one that actually tells you how much of the money coming in is profit. Confuse the two and you can end up pricing a product 15–20 percentage points lower than you meant to.
Markup vs. Margin — Same Numbers, Different Denominator
Both formulas start from the same two figures — cost and selling price — and the only thing that changes is what you divide by:
- Markup % = (Selling Price − Cost) ÷ Cost × 100 — measures profit against what you paid.
- Gross Margin % = (Selling Price − Cost) ÷ Selling Price × 100 — measures profit against what you charged.
Because selling price is always bigger than cost (assuming you're profitable), margin will always come out lower than markup for the exact same sale. A 100% markup — doubling your cost — is only a 50% margin. A 25% markup is roughly an 20% margin, not 25%. The two numbers converge only as they approach very small percentages, and they diverge more the higher they get. If your team quotes "margin" when they mean "markup" in a pricing meeting, the resulting price can be meaningfully wrong.
Worked Example: Setting a Price From a Target Margin
Suppose you're pricing a service that costs you ₹6,000 to deliver, and your business needs a 30% gross margin to stay healthy after all overheads. Rather than guessing a markup and hoping it lands near 30% margin, the direct formula is:
Selling Price = Cost ÷ (1 − Target Margin) → ₹6,000 ÷ (1 − 0.30) = ₹6,000 ÷ 0.70 = ₹8,571.43
Check it: profit is ₹8,571.43 − ₹6,000 = ₹2,571.43, and ₹2,571.43 ÷ ₹8,571.43 = 30.0% — exactly the margin you were aiming for. Notice this required roughly a 42.9% markup on cost to hit a 30% margin, not a 30% markup — that gap is exactly the confusion this tool is built to prevent.
Gross Margin vs. Net Margin — Two Different Questions
Gross margin only strips out the direct cost of the goods or service you sold (COGS) — materials, direct labour, the wholesale cost of what you resell. It tells you how efficiently you're pricing and producing. Net margin goes further and subtracts everything else it takes to keep the business running — rent, salaries not tied directly to production, marketing, software subscriptions, loan interest. A business can have a healthy 40% gross margin and still be barely breaking even at the net level if operating costs are too high relative to revenue. Both numbers matter, but they answer different questions: gross margin is about your pricing and production, net margin is about your whole operation.
What's a "Good" Margin?
There's no single healthy number — it depends heavily on the industry. Software and services businesses often run gross margins of 70–90% because there's little physical cost of goods once the product exists. Retail and grocery typically sit in a much tighter 20–35% gross margin band because of high wholesale costs and competition. Restaurants commonly target 60–70% gross margin on food alone, before rent and staff costs eat into the net figure. Manufacturing varies widely depending on capital intensity. The only reliable benchmark is comparing your own margin over time, and against businesses genuinely similar to yours — comparing a software company's margin to a grocery store's tells you nothing useful.
How to Use This Calculator
- Cost & Selling Price tab: enter what something cost you and what you're charging for it, and instantly see the gross profit, gross margin %, and markup % side by side, with a donut chart showing how the selling price splits between cost and profit.
- Find Selling Price tab: enter your cost and the gross margin % you're targeting, and the calculator tells you the exact price to charge and the equivalent markup, so you don't have to guess-and-check a markup number.
- Net Profit Margin tab: enter total revenue, cost of goods sold, and operating expenses to see both gross margin and true net margin for a period — useful for a monthly or quarterly business review rather than a single product.
Frequently Asked Questions
You're very likely calculating markup in your head (profit over cost) while your accountant is reporting margin (profit over revenue) — the two describe the same sale but always produce different numbers, and margin is the one used in financial statements and industry benchmarking.
It can be negative if you're selling below cost, but it can never exceed 100%, since profit can't be larger than the entire selling price. Markup, by contrast, has no upper limit — you could theoretically mark something up 500% or more.
Most retailers and service businesses set prices by starting with a target margin, because margin maps directly to "how much of this sale is profit," which is what feeds into your overall profitability targets. Markup is a useful shorthand at the point of costing an individual item, but margin is the number that should ultimately govern the price.
That gap is exactly your operating expenses as a share of revenue — rent, salaries, software, marketing, and everything else that isn't the direct cost of the product itself. A large gap usually means overheads are heavy relative to sales volume, which is worth investigating even if the gross margin looks healthy.
No — every calculation runs directly in your browser and nothing is saved, uploaded, or sent anywhere.
Conclusion
Margin and markup use the exact same two inputs and describe the exact same sale, but they answer different questions and produce different numbers — mixing them up is one of the most common, and most costly, pricing mistakes a small business can make. Use the first tab to check where you stand today, the second tab to price forward from a target margin, and the third tab whenever you need the fuller, net-of-everything picture.