CalcFees

Profit Margin Calculator

Enter cost and selling price to see your profit margin, markup, and dollar profit. Switch modes to find the selling price you need for a target margin.

$
$
Profit Margin
40.00%
(Revenue − Cost) ÷ Revenue
Markup
66.67%
(Revenue − Cost) ÷ Cost
Profit
$40.00
Cost $60.00
Revenue $100.00
Profit $40.00

Industry Benchmarks (Net Margin)

Software / SaaS
25.5%
Restaurant / Dining
9.4%
Consulting / Services
7%
Retail (General)
5.6%
Construction
5.9%
Your Margin
40.0%

Source: NYU Stern / Damodaran, January 2026

How to Calculate Profit Margin

The profit margin formula looks simple on paper -- subtract cost from revenue, divide by revenue, multiply by 100 -- but the number of sellers who accidentally divide by cost instead of revenue and end up with markup is staggering. We built this calculator after watching the same question surface hundreds of times across seller forums: "I thought my margin was 40% but my accountant says it is 28.6%." That gap is almost always the margin-versus-markup mixup, and it silently eats into pricing strategies for months before anyone catches it.

Profit Margin Formula vs Markup Formula

Here is the honest math that trips up even experienced sellers. Margin and markup both start from the same profit number but express it against different bases. Sell a candle for $25 that cost you $10 to make and your profit is $15 either way. Divide that $15 by the $25 selling price and you get 60% margin. Divide the same $15 by the $10 cost and you get 150% markup. Neither number is wrong -- they answer different questions. Margin tells you what fraction of every revenue dollar is profit, and it is the number your accountant cares about. Markup tells you how much you added on top of cost, and it is the number you use when setting prices on a spreadsheet. Mixing them up on a single product costs you a few dollars, but mixing them up across an entire catalog can quietly compress margins by 10-15 points before anyone notices the books look off.

Average Profit Margins by Industry

Asking "is my margin good?" without industry context is like asking if running a mile in eight minutes is fast -- the answer depends entirely on who you are racing against. Aswath Damodaran at NYU Stern publishes sector-level profitability data every January and the latest update (January 2026) puts software and SaaS companies at roughly 25.5% net margin, which makes sense given their near-zero marginal cost per user. Restaurants come in around 9.4%, general retail at 5.6%, and construction sits near 5.9%. The discount calculator can help you model how promotional pricing eats into those thin retail margins, and our platform fee comparison shows exactly how much each payment processor takes before your profit margin even starts. If you are managing employee costs alongside product margins, the overtime calculator helps you factor labor expenses into the equation.

Margin vs Markup Conversion Table

Margin Markup Cost $60 → Sell at Profit
10%11.1%$66.67$6.67
20%25.0%$75.00$15.00
30%42.9%$85.71$25.71
40%66.7%$100.00$40.00
50%100.0%$120.00$60.00

Industry margin data from NYU Stern / Aswath Damodaran, updated January 2026. Covers publicly traded US firms.

Frequently Asked Questions

How do I calculate profit margin?

Subtract cost from revenue and divide the result by revenue, then multiply by 100. A product that costs $60 and sells for $100 gives you $40 profit and a 40% margin. The formula trips people up because the denominator is revenue, not cost -- using cost gives you markup instead, which is always a higher number for the same transaction.

What is the difference between margin and markup?

Both measure profit but from different directions, and mixing them up is one of the most expensive mistakes in pricing. Margin divides profit by revenue -- so $40 profit on $100 revenue is 40% margin. Markup divides the same $40 profit by cost ($60), giving you 66.7% markup. The numbers describe the exact same transaction but markup will always look bigger, which is why some sellers prefer quoting it -- and why buyers should always ask which one they are hearing.

What is a good profit margin?

There is no universal answer because industry averages swing wildly. NYU Stern data from January 2026 puts software companies at roughly 25% net margin while general retail sits around 5.6% and restaurants land near 9.4%. A margin that would bankrupt a grocery store is considered mediocre in SaaS. The benchmarks in our calculator pull from Damodaran's dataset so you can see exactly where your numbers fall relative to your own sector.

How do I calculate selling price from a target margin?

Divide your cost by one minus the margin expressed as a decimal. If your cost is $60 and you want a 40% margin, the math is $60 divided by 0.60 which gives you $100. We built the "Calculate Price from Margin" mode specifically for this because the formula is counterintuitive -- most people try to add 40% of cost to cost, which only gives them a 40% markup and a lower margin than they intended.

Why is my margin always lower than my markup?

Margin uses the bigger number (revenue) as its base while markup uses the smaller number (cost), so the same dollar profit always produces a lower margin than markup. Sell something for $100 that cost $50 and you get 50% margin but 100% markup -- same $50 profit, different framing. The gap widens as profitability grows, which is exactly why this confusion causes pricing errors: a seller who targets "50% profit" without specifying which metric ends up at very different price points depending on whether they meant margin or markup.

How do I convert margin to markup?

Divide the margin percentage by one minus the margin as a decimal. A 30% margin converts to roughly 42.9% markup because 0.30 divided by 0.70 equals 0.4286. Going the other way, divide markup by one plus markup -- so 42.9% markup divided by 1.429 gives you back 30% margin. We see sellers get burned by this conversion constantly when they switch between accounting software that reports margin and e-commerce platforms that ask for markup.

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