Toolivaro

Free Profit Margin Calculator

Calculate profit margin percentage, gross profit, and markup from revenue and cost, with rounding you control.

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Total money received from sales.

Direct cost of the goods or services sold.

How is the result calculated?

Pricing a product: revenue 250, cost 175

You sell a batch of t-shirts for $250 and they cost you $175 to produce. First subtract cost from revenue: 250 − 175 = 75, so gross profit is $75. Margin divides that by revenue: 75 / 250 = 0.30, or 30%. Markup divides it by cost instead: 75 / 175 ≈ 0.4286, or 42.9%. The margin and markup are different numbers even though the profit is identical — margin is relative to what the customer pays, markup is relative to what you paid.

Input Value
revenue 250.00
cost 175.00
Result Gross profit $75.00 · margin 30.0% · markup 42.9%

What is the formula and its assumptions?

Gross profit

gross profit = revenue − cost

Symbol Meaning
revenue total money received from sales before any deductions
cost direct cost of the goods or services sold

Margin percentage

margin % = (revenue − cost) / revenue × 100

Symbol Meaning
revenue − cost gross profit
revenue total sales value

Margin is always a percentage of revenue. It can never exceed 100% — the denominator is revenue, which always includes the profit itself.

Markup percentage

markup % = (revenue − cost) / cost × 100

Symbol Meaning
revenue − cost gross profit
cost direct cost of goods sold

Markup is a percentage of cost, so it can exceed 100%. A 50% margin is not the same as a 50% markup — see the worked example.

What are the most common mistakes?

  • Confusing margin with markup: 30% margin and 30% markup are different results, and using one when you mean the other misprices the product.
  • Using net profit instead of gross profit: margin here uses only direct cost, not rent, salaries, or other operating expenses.
  • Entering a percentage as a decimal (e.g. 0.3) when the field expects a currency amount, which produces results off by a factor of one hundred.

What are the assumptions and limitations?

  • Gross margin excludes indirect costs such as rent, salaries, marketing, and shipping — it is not a proxy for overall profitability.
  • Results are estimates for pricing decisions, not professional financial advice; confirm significant pricing decisions with current cost data and, where relevant, an accountant.
  • The calculator assumes a single cost figure per unit or batch; mixed product lines with shared overhead need a more detailed model.

Where do the numbers come from?

Last reviewed August 4, 2026 · Version 1.0.0 · Toolivaro does not guarantee external content.

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Frequently asked questions

What is the difference between margin and markup?

Margin is gross profit expressed as a percentage of revenue; markup is gross profit expressed as a percentage of cost. On a $100 sale with $60 of cost, margin is 40% while markup is 66.7%. They measure the same profit against different bases, so they always differ unless profit is zero.

Can profit margin be more than 100%?

No. Margin is profit divided by revenue, and profit can never exceed revenue, so margin is always below 100%. Markup, which divides profit by cost, can exceed 100% — for example, a product costing $10 sold at $25 has a 150% markup but only a 60% margin.

What is a good profit margin?

There is no universal number. Typical gross margins vary widely by industry — software and services often exceed 70%, groceries often sit in the 20–30% range. Compare your margin to your own past performance and to published industry benchmarks rather than an arbitrary target.

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