What is the difference between margin and markup?

Both describe the same profit, measured against different denominators. Margin is profit divided by revenue, markup is profit divided by cost. A $30 item sold for $48 carries a 37.50% margin and a 60.00% markup. Margin is always the smaller number, and it is the one that tells you what share of a sale you keep.

Does this give gross margin or net margin?

Whichever you feed it. Enter direct costs only for a gross margin, or every cost including overhead, salaries and rent for a net margin. The tool cannot separate the two for you because it sees only the single cost number you type.

Why does nothing happen when my cost exceeds revenue?

The page refuses to calculate when cost is greater than revenue, so a loss-making sale produces no result rather than a negative margin. Work the loss out by hand as revenue minus cost, and treat the silence as a limitation of the tool rather than a verdict on your numbers.

Should sales tax be included in revenue?

No. Sales tax collected is not yours, it is remitted to the state, so including it inflates both revenue and margin. Enter the pre-tax sale price.

How do I price to hit a specific margin?

Divide the cost by one minus the margin expressed as a decimal. For a 40% margin on a $30 cost, that is 30 divided by 0.6, which is $50. Enter $50 and $30 in the tool and it confirms a 40.00% margin against a 66.67% markup.

Does this account for income tax on the profit?

No. The profit shown is before tax of any kind. What you owe depends on your entity type, your other income and your jurisdiction, none of which this calculator asks about.

Profit Margin Calculator: Margin vs Markup Explained

Profit Margin Calculator: Margin vs Markup ExplainedThe Profit Margin Calculator is a free browser-based tool that takes a revenue figure and a cost figure and returns three results: the profit in dollars, the profit margin as a percentage of revenue, and the markup as a percentage of cost. Margin and markup are the same dollars measured against different bases, and mixing them up is one of the most expensive small-business arithmetic errors there is. Because you choose what goes in the cost field, the tool can produce a gross margin or a net margin. It will not compute a negative margin, so a loss-making sale returns nothing.

What people use it for

Pricing a new product line without underselling it

A bakery owner adding celebration cakes knows ingredients and labour cost $30 per cake and plans to charge $48. The calculator shows $18 profit, a 37.50% margin but a 60.00% markup. Aiming for a 50% margin would mean pricing at $60, not the $45 a 50% markup would suggest, and that gap is the entire lesson.

Checking a wholesale deal before agreeing to it

A distributor offers to buy at a fixed price per unit. Entering that price as revenue and the landed cost as cost shows immediately whether the margin survives once shipping and duty are included, and whether the volume is worth the thinner percentage.

Working out net margin rather than gross

The cost field takes whatever you put in it. Entering total costs, including overhead and not just cost of goods, converts the result into a net margin. A consultancy with $250,000 of revenue and $175,000 of all-in costs sees a 30.00% net margin and a 42.86% markup.

Setting a floor before a customer negotiation

Before discounting, an owner works out the sale price at which the margin becomes unacceptable. Having that number written down turns a negotiation into a decision with a known limit rather than a concession made under pressure.

How it works

Enter revenue or sale price Use the price for a single unit, a single job, or a whole period. The arithmetic is identical at any scale, as long as the cost you enter covers exactly the same thing.
Enter the cost The field is labelled Cost of Goods, but it takes whatever cost basis you want. Direct costs only give you a gross margin, while total costs including overhead give you a net margin.
Press Calculate Margin The tool echoes your revenue and cost, then shows profit in dollars prominently, with profit margin and markup percentage side by side underneath so the difference between them is visible.
Read margin and markup as different things Margin divides profit by revenue and can never reach 100%. Markup divides the same profit by cost and has no ceiling at all. Quoting one when you meant the other is what causes underpricing.
Work backwards to find a target price To hit a target margin, adjust the revenue figure and recalculate until the margin percentage matches your goal. The tool has no reverse mode, so a few iterations is the fastest route.

Worked examples

Input: Revenue $10,000, cost $6,000.

Result: Profit $4,000, profit margin 40.00%, markup 66.67%. The same $4,000 looks very different depending on whether it is measured against revenue or against cost.

Input: Revenue $48, cost $30 for a single product.

Result: Profit $18, profit margin 37.50%, markup 60.00%. A trader who marked up 60% and assumed a 60% margin would be short by more than a third of the profit they expected.

Input: Revenue $250,000, total costs $175,000 including overhead.

Result: Profit $75,000, profit margin 30.00%, markup 42.86%. Because overhead was included, the 30.00% here is a net margin rather than a gross one.

Frequently asked questions

What is the difference between margin and markup?: Both describe the same profit, measured against different denominators. Margin is profit divided by revenue, markup is profit divided by cost. A $30 item sold for $48 carries a 37.50% margin and a 60.00% markup. Margin is always the smaller number, and it is the one that tells you what share of a sale you keep.
Does this give gross margin or net margin?: Whichever you feed it. Enter direct costs only for a gross margin, or every cost including overhead, salaries and rent for a net margin. The tool cannot separate the two for you because it sees only the single cost number you type.
Why does nothing happen when my cost exceeds revenue?: The page refuses to calculate when cost is greater than revenue, so a loss-making sale produces no result rather than a negative margin. Work the loss out by hand as revenue minus cost, and treat the silence as a limitation of the tool rather than a verdict on your numbers.
Should sales tax be included in revenue?: No. Sales tax collected is not yours, it is remitted to the state, so including it inflates both revenue and margin. Enter the pre-tax sale price.
How do I price to hit a specific margin?: Divide the cost by one minus the margin expressed as a decimal. For a 40% margin on a $30 cost, that is 30 divided by 0.6, which is $50. Enter $50 and $30 in the tool and it confirms a 40.00% margin against a 66.67% markup.
Does this account for income tax on the profit?: No. The profit shown is before tax of any kind. What you owe depends on your entity type, your other income and your jurisdiction, none of which this calculator asks about.

Tips

Decide once whether you speak in margin or markup and make everyone in the business use the same word. Most pricing mistakes start as a vocabulary mistake.
Include every direct cost, not just the obvious one. Payment processing fees, packaging and shipping quietly consume several points of margin.
Run the calculation on your best-selling item and your worst. Volume often hides the fact that the popular product carries the thinnest margin.
Recheck margins whenever supplier prices move. A cost rise of a few percent takes a much larger bite out of the margin percentage than it looks like it should.

Written by Ahsan Mahmood. Last updated 2026-07-21. This calculator runs entirely in your browser and produces estimates, not tax advice.TaxEase — Profit Margin Calculator: Margin vs Markup Explained