Profit margin and markup calculator
Calculate profit, profit margin and markup from cost and selling price.
Margin is profit over price; markup is profit over cost. They are not the same.
How the calculation works
The most common pricing mistake is mixing up margin and markup. Both use the same profit, but divide by different bases.
profit = price − cost
- Margin = profit ÷ price × 100 (share of the price that is profit)
- Markup = profit ÷ cost × 100 (how much you added over cost)
Step-by-step example (cost R$60, price R$100)
- Profit: 100 − 60 = R$40
- Margin: 40 ÷ 100 = 40%
- Markup: 40 ÷ 60 = 66.7%
Pricing from a target margin
To hit a target margin, do not just add that percentage to the cost. Use:
price = cost ÷ (1 − margin)
For a 40% margin on a R$60 cost: 60 ÷ 0.60 = R$100. Adding "40% of 60" would give only R$84 — a real margin of just 28.6%.
Gross margin ≠ net profit
This is gross margin (price − product cost). Real profit still subtracts taxes, shipping, commissions, rent and fixed costs.
Examples
- Cost R$60, price R$100: margin 40%, markup 66.7%.
- For 30% margin on a R$70 cost: price = 70 ÷ 0.70 = R$100.
Frequently asked questions
Margin vs markup — what is the difference?
Margin is based on the selling price; markup is based on the cost. Markup is always the larger number.
Why not just add the margin to the cost?
Because margin is a fraction of the price, not the cost. Adding it to the cost yields a smaller real margin. Use price = cost ÷ (1 − margin).
Is a 100% margin possible?
No. Margin approaches 100% only as cost approaches zero, never reaching it. Markup, however, can exceed 100%.
What margin is considered good?
It depends on the sector: grocery retail runs on thin margins, while services and software have high ones. Always compare within your segment.
Margin versus markup?
Margin divides profit by the selling price; markup by cost. A R$60 item sold at R$100 has 40% margin and 66.7% markup.
Good margin but no money left. Why?
You are likely looking at gross margin, which only deducts product cost. Only net margin answers whether the business is viable.
How much more must I sell when discounting?
It depends on margin. At 40% margin, a 10% discount needs about 33% more volume; at 20% margin, double.
What gets left out of cost?
Card fees, sales taxes, shipping, shrinkage, marketplace commission — and the owner's own labour.
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Updated on June 18, 2026 · by Rafael Rossi · Methodology & sources