Profit Margin Calculator

Enter a revenue figure (or a single selling price) and a cost. The calculator returns three numbers:

• Profit margin: (revenue − cost) ÷ revenue × 100
• Profit: revenue − cost
• Markup: (revenue − cost) ÷ cost × 100

With the defaults, $100 of revenue and $60 of cost give a 40.00% margin, $40 of profit and a 66.67% markup. The same two fields work for one unit or for a whole year, as long as the revenue and the cost cover the same thing.

Enter revenue without sales tax or VAT. Tax you collect for the government is not income, and including it makes every margin look better than it is.

The calculator doesn't know which costs you mean, and that is what makes it flexible. Run it three times against the same revenue, adding a layer of cost each time, and you get the three margins most income statements show.

Say a small business had $250,000 of revenue in a year, $150,000 of cost of goods sold, $70,000 of operating expenses (rent, wages, software, marketing) and $12,000 of interest and tax:

Each gap tells you something different. The fall from 40% to 12% is the cost of running the business; the fall from 12% to 7.2% is financing and tax. If the gross margin is healthy but the operating margin is thin, look at overheads before you touch prices. Ignore the markup line on the second and third runs: markup only means something when the cost is a product cost.

Discounts come straight out of profit, because the cost stays the same. Take the default item, priced at $100 with a $60 cost, and run the discounted prices through the calculator:

The last column is old profit ÷ new profit − 1: how many more units you have to sell just to earn the same gross profit as before. A 20% sale on a 40% margin item has to double your volume to break even on the promotion. The lower your starting margin, the faster that number climbs.

Suppose your supplier raises the cost of the default item from $60 to $64 and you keep the $100 price. The calculator now shows a 36.00% margin and $36 of profit.

That is a drop of 4 percentage points (40 to 36). It is also a 10% drop in the margin itself, and a 10% drop in profit per unit. All three statements are true, but they are easy to mix up in a report. Saying the margin fell 4% when you mean 4 points understates the problem, so name the unit every time.

The same habit helps when you compare periods: write the margin for each period from its own totals, then state the change in points.