Calculate gross profit margin and markup percentage from cost and selling price. Instantly convert between margin and markup.
Profit Margin & Markup Calculator
From Cost + Price → Margin & Markup
Gross Profit
Profit Margin
Markup %
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From Cost + Target Margin → Selling Price
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Profit Margin vs Markup: The Critical Difference
Margin and markup both describe profitability, but they use different bases for calculation. Confusing them is one of the most common pricing mistakes in business — you can easily underprice products and lose money if you mix them up.
Formulas
Gross Profit Margin = (Selling Price − Cost) / Selling Price × 100 — profit as % of revenue
Markup = (Selling Price − Cost) / Cost × 100 — profit as % of cost
Example: Item costs $60, sells for $100. Gross profit = $40. Margin = 40/100 = 40%. Markup = 40/60 = 66.7%. Same product, two different numbers — always clarify which you mean.
What is a Good Profit Margin?
Retail: 20–50% gross margin
SaaS: 60–80%+ gross margin
Restaurants: 60–70% gross, 3–9% net
E-commerce: 30–50% gross
Manufacturing: 10–40% gross
Net vs Gross Margin
Gross margin only subtracts the direct cost of goods (COGS). Net margin also subtracts operating expenses, taxes, and interest. A business with 60% gross margin and 5% net margin has substantial overhead. Both metrics are needed for a complete picture.
Frequently Asked Questions
Margin = Markup / (1 + Markup). Example: 50% markup → 50/150 = 33.3% margin. Conversely, Markup = Margin / (1 − Margin). A 40% margin → 40/60 = 66.7% markup. This conversion is essential when your supplier quotes a markup but you need to know your margin.
Markup = Margin / (1 − Margin) = 0.40 / 0.60 = 66.7%. So if your product costs $60, sell it for $60 × 1.667 = $100 to achieve a 40% gross margin. A common mistake is to add 40% markup ($60 × 1.40 = $84) thinking that gives 40% margin — but $84 sale on $60 cost is only 28.6% margin.
Gross margin = (Revenue − COGS) / Revenue. EBITDA margin = EBITDA / Revenue, where EBITDA = Gross Profit − Operating Expenses + Depreciation & Amortization add-back. EBITDA margin shows operating profitability before financing and accounting adjustments. It's widely used in business valuations and M&A as a proxy for cash flow generation.
For SaaS and subscription businesses, COGS includes hosting/infrastructure, customer support, and payment processing — not product development salaries. A SaaS company with $1M ARR, $200K in hosting and support costs has an 80% gross margin. High gross margins (70%+) are what make SaaS businesses valuable, as most revenue above COGS flows to profit at scale.