What Is Profit Margin?
Margin expresses profit as a percentage of revenue (selling price):
Profit Margin = (Selling Price − Cost) / Selling Price × 100
Gross margin uses cost of goods sold (COGS). Operating margin subtracts operating expenses. Net margin is after all expenses and taxes.
Margin answers: "Of every dollar sold, how many cents are profit?"
Margin vs Markup
They are not the same — different denominators:
| Markup | Margin | |
|---|---|---|
| Base | Cost | Revenue (price) |
| Formula | (Price − Cost) / Cost | (Price − Cost) / Price |
| Markup | ≈ Margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
A 100% markup (double cost) = 50% margin — a classic confusion in pricing meetings.
Converting Margin and Markup
Using decimals:
Margin = Markup / (1 + Markup)
Markup = Margin / (1 − Margin)
Example: 40% margin → 0.40 / 0.60 = 0.667 → 66.7% markup on cost.
Industry Context
| Sector | Typical gross margin (very rough) |
|---|---|
| Grocery | Low single digits to teens % |
| SaaS | 70–90%+ |
| Retail apparel | 40–55% |
Always compare to peers and stage of business — startups may sacrifice margin for growth.
How to Use This Margin Calculator
Enter cost and selling price (or revenue). The tool shows margin %, markup %, and profit per unit so you can price confidently and align with how finance reports metrics.