How to calculate profit margin
Profit margin is the percentage of revenue that remains as profit after deducting the cost of goods or services. It is one of the most important metrics for any business — it tells you how efficiently you are converting sales into actual profit.
The formula is: Profit Margin = (Selling Price minus Cost Price) divided by Selling Price, multiplied by 100. A product that costs Rs 500 to make and sells for Rs 800 has a profit of Rs 300 and a margin of 37.5 percent.
Profit margin vs markup — what is the difference?
Profit margin is calculated as a percentage of the selling price. Markup is calculated as a percentage of the cost price. For the same product, the markup is always higher than the margin. If you want to price at a 50 percent markup, that gives you a 33.3 percent margin, not 50 percent. This calculator shows both simultaneously so you never confuse the two.
Who uses a profit margin calculator?
Small business owners pricing their products. Freelancers calculating whether their rate covers costs and leaves a sustainable profit. Traders and resellers checking margins on imported or wholesale goods. E-commerce sellers working out whether their selling price on Amazon, Daraz, or Instagram is actually profitable after costs. Restaurants pricing menu items correctly.
What is a good profit margin?
It depends entirely on the industry. Grocery retail typically runs at 2 to 5 percent margins. Software and digital products often achieve 60 to 80 percent margins. Clothing retail averages 40 to 60 percent. Service businesses like consulting and freelancing can target 50 percent or higher. Manufacturing typically falls between 10 and 30 percent.
Frequently Asked Questions
How do I calculate profit margin percentage? Subtract cost from selling price to get profit, then divide profit by selling price and multiply by 100. This calculator does this instantly as you type.
What is the difference between gross margin and net margin? Gross margin only deducts the direct cost of goods. Net margin deducts all costs including overheads, salaries, and taxes. This calculator computes gross margin — your net margin will be lower once you account for all business expenses.
How do I set a price to achieve a target margin? Divide your cost by (1 minus target margin as decimal). To achieve a 40 percent margin on a Rs 600 cost: 600 divided by 0.60 equals Rs 1,000 selling price.
ROI Calculator · Break-Even Calculator · GST VAT Calculator · Invoice Generator · Salary Calculator