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Profit Margin Calculator
Profit Margin Calc
Calculate the ideal selling price based on your desired margin
$0
Ideal Selling Price
Gross Profit
$0
Markup Rate
0%
Cost Basis
$0
Price Composition
About the Profit Margin Calculator
Find the selling price you need to reach a target profit margin from your cost of goods.
How to use the Profit Margin Calculator
- Enter the Cost of Goods ($).
- Enter your Desired Margin (%).
- Press Calculate Selling Price.
Formula and method
Selling price = Cost ÷ (1 − Margin ÷ 100)
Margin is profit as a share of the selling price, which is different from markup.
Worked example
A product that costs $60 with a 40% target margin must sell for 60 ÷ 0.60 = $100, giving $40 profit.
Margin versus markup. An item that costs 80 and sells for 100 has a profit of 20. The margin is 20 ÷ 100 = 20% (based on the selling price). The markup is 20 ÷ 80 = 25% (based on the cost).
When to use the Profit Margin Calculator
- Checking whether your prices leave enough profit.
- Comparing the profitability of different products.
- Working out the selling price you need for a target margin.
Common mistakes to avoid
- Mixing up margin and markup. They use different bases and give different percentages.
- Ignoring overhead such as advertising, rent and staff when you judge profit.
- Discounting without checking what it does to the margin.
Tips
- Do not confuse margin with markup: a 40% margin is a 66.7% markup on cost.
- Include overhead and shipping in cost to see your real margin.
Frequently Asked Questions
It depends on the industry. Retail often runs 5 to 10 percent net, while software can be much higher.
It varies by industry. Retail may have low margins, while software can be much higher. Compare with similar businesses.
Revenue minus the direct cost of goods sold, divided by revenue. It does not include overheads.