How the Profit Margin Calculator Works
The Three Core Formulas
Gross Margin
Margin = (Price − Cost) ÷ Price × 100Example: Cost $30, Price $50 → ($50−$30)÷$50×100 = 40% margin
Markup
Markup = (Price − Cost) ÷ Cost × 100Example: Cost $30, Price $50 → ($50−$30)÷$30×100 = 66.7% markup
Selling Price from Target Margin
Price = Cost ÷ (1 − Target Margin%)Example: Cost $30, target 40% margin → $30÷0.60 = $50 selling price
Why Margin ≠ Markup
The most common pricing mistake is confusing margin with markup. A 50% markup gives you a 33.3% margin — not a 50% margin. If your buyer asks for a "30% margin" and you apply a 30% markup instead, you will underprice by several points.
| Markup % | Resulting Margin % |
|---|---|
| 25% | 20% |
| 33% | 25% |
| 50% | 33.3% |
| 67% | 40% |
| 100% | 50% |
| 150% | 60% |
| 300% | 75% |
Industry Benchmarks
Our calculator includes gross margin benchmarks for 15 industries sourced from industry association data and public company financials.
- • Grocery / food retail: 1–3% (razor thin, high volume)
- • Restaurants: 3–9% net, 60–70% gross on food alone
- • E-commerce: 20–40% gross (before marketing spend)
- • SaaS: 60–80% gross margin (low marginal cost)
- • Consulting: 50–75% gross on billable hours