How to use the profit margin calculator
Pick the question you want answered, fill in two numbers and the results update as you type. Every mode shows the same set of results, so you can always see the price, profit, margin and markup together.
- Cost + price. You already know what an item costs you and what you sell it for. The calculator shows your profit, your margin and your markup.
- Target margin. You know your cost and the margin you want, for example 40%. The calculator gives the selling price that delivers it.
- Markup %. You add a fixed markup to your costs, such as 100% (doubling). The calculator shows the price and the margin that markup really gives you.
- Max cost. The market sets your price and you want to keep a certain margin. The calculator shows the most you can spend making or buying each item.
Open extra costs per sale to add shipping you pay, marketplace and payment fees as a percentage, a fixed fee per order and any VAT or GST that is included in your price. The results then show your net margin: what you actually keep after everything is paid. Press Load example to see a worked case for the mode you have chosen.
Profit margin formula
Profit margin tells you how much of every sale you keep as profit. It is always measured against the selling price:
Profit = selling price − cost
Margin % = profit ÷ selling price × 100
Example: a candle costs 20 to make and sells for 50. Profit is 50 − 20 = 30, and the margin is 30 ÷ 50 × 100 = 60%. Out of every 50 a customer pays, you keep 30 before other costs.
Markup formula
Markup is the same profit, measured against the cost instead of the price:
Markup % = profit ÷ cost × 100
For the same candle, the markup is 30 ÷ 20 × 100 = 150%. The profit has not changed; only the number you divide by has. This is why markup is always the bigger of the two figures.
Margin vs markup: the difference that causes underpricing
Margin and markup describe one sale from two directions, and mixing them up is one of the most common pricing mistakes. Our guide to margin vs markup walks through the formulas and a conversion chart. Suppose you want a 50% margin and you add 50% to your cost. An item costing 20 becomes 30, the profit is 10, and the margin is only 10 ÷ 30 = 33.3%. To reach a true 50% margin you need a 100% markup, which gives a price of 40.
The table below converts common margins to the markup you need. The multiplier is the number you multiply your cost by to get the price.
| Margin | Markup needed | Cost multiplier |
|---|---|---|
| 10% | 11.1% | 1.11 |
| 20% | 25% | 1.25 |
| 25% | 33.3% | 1.33 |
| 30% | 42.9% | 1.43 |
| 33.3% | 50% | 1.5 |
| 40% | 66.7% | 1.67 |
| 50% | 100% | 2 |
| 60% | 150% | 2.5 |
| 75% | 300% | 4 |
The conversions are simple to do by hand: markup = margin ÷ (1 − margin) and margin = markup ÷ (1 + markup), using decimals (40% = 0.4).
How to calculate a selling price from a target margin
Divide your cost by one minus the margin:
Price = cost ÷ (1 − margin)
With a cost of 20 and a 40% margin, the price is 20 ÷ 0.60 = 33.33. Check it: the profit is 13.33, and 13.33 ÷ 33.33 = 40%. A common mistake is to multiply the cost by 1.4 instead, which gives 28 and only a 28.6% margin.
If you sell on a marketplace, fees are taken as a percentage of the price, so they need to come out of the margin too. The calculator uses price = (cost + shipping + fixed fees) ÷ (1 − margin − fee %). With a cost of 20, shipping of 4, a fixed fee of 0.45, fees of 9.5% and a 40% net margin, the price is 24.45 ÷ 0.505 = 48.42. Because fees and margin are both slices of the same price, they can never add up to 100% or more, and the calculator tells you when a target is impossible.
Gross margin vs net margin
Gross margin only compares the price with what the item costs to make or buy. Net margin also subtracts the costs of each sale, such as postage, marketplace and payment fees and tax included in the price. A product can look healthy at a 60% gross margin and still leave only about 40% after fees and shipping, as the Load example shows. For a full breakdown of marketplace fees, use the Etsy fee calculator; to build up the cost of a handmade item from materials, labour and overheads, start with the product pricing calculator.
What is a good profit margin?
There is no single right number. Resellers of branded goods often work on thin margins and high volume, while makers of handmade products usually need much higher margins because each item takes time to make and sells in smaller numbers. Many makers aim for a retail price of around four times the cost of materials and labour, which leaves room for a wholesale price and for fees. Whatever your target, it should cover your overheads, your own pay and an allowance for returns and discounts. Our guide to wholesale vs retail pricing explains how the two price levels fit together, and the percentage calculator helps with any other percentage questions.
Want the full explanation? Read our guide: How to price handmade products.
More guides on this topic:
- Margin vs markup: formulas and conversion
- Wholesale vs retail pricing for makers
- How to calculate break-even for a small online business
Taking PayPal, Stripe or Square as well? Use the PayPal Fee Calculator to see the processing fee and what to charge.
Frequently asked questions
How do I calculate profit margin?
Subtract the cost from the selling price to get the profit, then divide the profit by the selling price and multiply by 100. An item that costs 20 and sells for 50 has a profit of 30 and a margin of 30 ÷ 50 = 60%.
What is the difference between margin and markup?
Both use the same profit. Margin divides it by the selling price, and markup divides it by the cost. A 20 item sold for 50 has a 60% margin and a 150% markup. A 50% margin always needs a 100% markup. See our margin vs markup guide for conversion formulas and examples.
How do I find the selling price for a target margin?
Divide the cost by (1 − margin). For a 40% margin on a cost of 20, the price is 20 ÷ 0.6 = 33.33. If marketplace fees take a percentage of the price, subtract that percentage as well: cost ÷ (1 − margin − fee %).
Why can't the margin be 100% or more?
Margin is the share of the price you keep as profit. Keeping 100% would mean the item cost nothing, and more than 100% is impossible. Markup has no such limit, because it is measured against cost.
Should I include fees and shipping in my margin?
Yes, if you want to know what you actually keep. Add them under extra costs and the calculator shows your net margin. Gross margin, before those costs, is still shown so you can compare products.
Is my data saved or sent anywhere?
No. All calculations run in your browser. The numbers you enter are not sent to our server or stored.