How to use this profit margin calculator
Pick what you want to solve for, then enter two numbers. The calculator updates instantly.
- Find your margin. Enter the selling price (revenue) and what it cost you. You get gross profit, profit margin, and markup side by side.
- Set a price. Enter your cost and the margin you want to earn. The tool tells you what to charge.
- Cap your costs. Enter the price the market will bear and the margin you need. The tool tells you the most you can spend.
All inputs accept dollar signs and commas, so you can paste figures straight from a spreadsheet.
The profit margin formula
Profit margin is profit expressed as a percentage of revenue:
Profit margin (%) = (Revenue − Cost) ÷ Revenue × 100
For example, a landscaping job billed at $2,500 with $1,600 in labour and materials has a profit of $900 and a margin of 36%.
To find the price that gives you a target margin, rearrange the formula:
Price = Cost ÷ (1 − Target margin)
A $1,600 job priced for a 40% margin needs to be billed at $1,600 ÷ 0.60 = $2,666.67.
Margin vs. markup: the mistake that quietly costs money
Margin and markup describe the same dollar profit but from different angles, and confusing them is one of the most common pricing errors small businesses make.
| Feature | Margin | Markup |
|---|---|---|
| Based on | Selling price | Cost |
| Formula | Profit ÷ Revenue | Profit ÷ Cost |
| $60 cost, $100 price | 40% | 66.7% |
| To hit "40%" | Charge $100 | Charge $84 |
If you tell a supplier or a spreadsheet to "add 40%" thinking you're getting a 40% margin, you actually end up with a 28.6% margin. On $500,000 of annual sales, that's more than $57,000 of profit you thought you had. Use our markup calculator when you're working from cost, and this page when you're working from price.
Gross margin vs. net margin
The calculator works for either. The difference is entirely in what you count as "cost":
- Gross margin uses only the direct cost of producing what you sold: materials, inventory, and direct labour. It tells you whether your core product or service is priced sensibly.
- Operating margin subtracts operating expenses too: rent, salaries, marketing, software, insurance.
- Net margin subtracts everything, including interest and taxes. It is what's actually left over.
A healthy gross margin with a thin net margin usually means overheads are too high for the volume of business. A thin gross margin usually means pricing or supplier costs are the problem, and no amount of overhead trimming will fix it.
Typical profit margins by industry
These are rough net margin ranges for established U.S. small businesses, useful as a sanity check rather than a target:
| Industry | Typical net margin |
|---|---|
| Restaurants and food service | 3% – 6% |
| Retail (general) | 2% – 6% |
| Construction and trades | 5% – 10% |
| Consulting and professional services | 15% – 25% |
| Accounting and bookkeeping | 18% – 25% |
| Software and SaaS | 15% – 30%+ |
| Freelance creative services | 20% – 40% |
If your margins are well below your industry, the fixes are usually one of three: raise prices, lower cost of goods, or cut the overheads that don't drive sales. Running your numbers through this calculator before and after each change shows you exactly how much each move is worth.
When margin alone isn't enough
Margin tells you profitability per sale but not whether the business pays you. Two other numbers matter alongside it:
- Break-even revenue = Fixed costs ÷ Gross margin. If your fixed costs are $8,000 a month and your gross margin is 40%, you need $20,000 in monthly sales before you earn a dollar.
- Owner's pay. If you're self-employed, remember that a share of your "profit" is also your salary, and it's subject to self-employment tax. A 30% margin can feel much smaller after the IRS takes its share.
Once you know your margin and your fixed costs, the business loan calculator can help you check whether new financing is affordable at your current profit level.