Enter a cost and a selling price to see your gross profit margin, the profit in dollars, and the equivalent markup.
Gross margin is the share of a selling price that is profit after the product cost. Divide profit by the selling price, then multiply by 100. A $40 item sold for $50 has a $10 profit, which is a 20 percent gross margin. Margin always stays below 100 percent, unlike markup.
Gross margin
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What Is Gross Margin?
Gross margin is the percentage of a sale that you keep as profit after paying for the product itself. It is one of the clearest signals of whether a price is healthy, because it measures profit against the price the customer actually pays.
Unlike markup, gross margin can never exceed 100 percent, since the profit can never be larger than the price. That upper limit makes margin a reliable way to compare products, price tiers and whole businesses on the same scale.
How to Calculate Gross Margin
Margin % = (Price - Cost) / Price x 100Subtract the cost from the selling price to get the profit, divide that by the selling price, then multiply by 100. If an item costs $40 and sells for $50, the profit is $10, and dividing by the $50 price gives a 20% gross margin.
The calculator above does this instantly and also shows the same profit as a markup, so you can see both numbers side by side.
How to Read Your Result
The main figure is your gross margin percentage. A higher number means more of each sale is profit. What counts as good varies widely by industry: grocery and hardware often run under 25 percent, while software and jewellery can exceed 70 percent, so compare against typical figures for your own sector.
The profit box shows the same result in dollars per unit, which is useful when you want the cash figure rather than a percentage. Watch both, because a high margin on a low price can still be a small amount of money.
More detail
Margin vs Markup
Margin and markup describe the same profit from two angles. Margin divides profit by the selling price, while markup divides it by the cost. Because the price is the larger number, the margin percentage is always smaller than the markup percentage for the same sale.
A 25 percent markup equals a 20 percent margin; a 100 percent markup equals a 50 percent margin. If you price up from cost, use the markup calculator instead, which starts from a markup percentage and returns the price.
Limitations and What It Leaves Out
This is gross margin, so it only accounts for the direct cost of the product. It does not subtract overheads, wages, shipping, marketing or tax, which means your net margin will be lower once those are included.
For a fuller picture of the money moving through a business, pair this with a cash flow calculator, and use the hourly cost calculator to see what your own time really costs before you set a price.
What is a good gross margin?
It varies by industry. Grocery and hardware often run on thin margins under 25 percent, while software and jewellery can exceed 70 percent. Compare against typical figures for your own sector rather than a single benchmark.
What is the difference between margin and markup?
Margin is profit as a percentage of the selling price, so it caps at 100 percent. Markup is profit as a percentage of the cost, so it can be well above 100 percent. A 50 percent margin equals a 100 percent markup.
Does this include tax or overheads?
No. This is gross margin, which only accounts for the direct cost of the product. It does not subtract overheads, wages, shipping or tax, so your net margin will be lower.
How do I convert margin to markup?
Divide the margin by one minus the margin. A 20 percent margin is a 25 percent markup; a 50 percent margin is a 100 percent markup. The calculator shows both figures at once.
Is my data saved?
No. The calculation runs entirely in your browser and nothing you enter is stored or sent anywhere.
Sources
- Gross margin: definition and formula (Corporate Finance Institute).
- The difference between markup and margin (Corporate Finance Institute).
- Managing small-business finances (U.S. Small Business Administration).
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