Calculate gross profit margin, markup percentage and gross profit from cost and selling price. Or enter cost and target margin to find the required selling price.
Enter cost and selling price to calculate gross margin and markup. Or enter cost and target margin to find the required selling price.
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Gross profit margin is the percentage of revenue remaining after deducting the cost of goods sold. Formula: GPM = (Revenue - COGS) / Revenue x 100. Example: revenue 100 dollars, COGS 40 dollars, GPM = 60%. A 60% margin means 60 cents of every revenue dollar is gross profit before operating expenses. Good margins vary by industry: software 70-85%, retail 25-50%, food service 60-70% gross.
Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost. For the same transaction (cost 40 dollars, price 100 dollars, profit 60 dollars): margin = 60/100 = 60%, markup = 60/40 = 150%. Confusing these is one of the most common and costly pricing mistakes. To convert: Margin = Markup / (1 + Markup); Markup = Margin / (1 - Margin).
Selling Price = Cost / (1 - Target Margin as decimal). For cost 40 dollars with a 60% target margin: Price = 40 / (1 - 0.60) = 40 / 0.40 = 100 dollars. A 60% margin requires a 150% markup, not a 60% markup. Our calculator handles this reverse calculation automatically when you enter cost and target margin without entering a selling price.
Good margins vary dramatically by industry. Software and SaaS: 70-85% gross margin. Professional services: 50-70%. Retail: 25-50%. Food service: 60-70% gross but 3-9% net. Manufacturing: 10-30%. E-commerce: 40-60% gross. Compare your margin to industry benchmarks rather than a universal standard. What matters is whether gross margin sufficiently covers all operating expenses.
Gross margin deducts only direct production costs (COGS) from revenue. Net margin deducts all costs including salaries, rent, marketing, interest and taxes. A business might have a 60% gross margin but only 10% net margin after all operating costs. Gross margin shows pricing power and product profitability; net margin shows whether the overall business model is financially sustainable.
Strategies to improve margin: increase prices (even a 5% price increase has a disproportionate margin impact since fixed costs are unchanged), reduce COGS through supplier negotiation or process efficiency, eliminate low-margin products or services, upsell higher-margin offerings, and reduce waste in delivery. Tracking margin by product line helps identify where improvement is most achievable.
Contribution margin = Selling Price - Variable Costs. It shows how much each unit sold contributes to covering fixed costs before profit. Example: price 100 dollars, variable cost 35 dollars, contribution margin = 65 dollars per unit. If fixed costs are 50,000 dollars per month, break-even volume = 50,000 / 65 = 770 units. Contribution margin is essential for pricing decisions and break-even analysis.
Gross profit is the absolute dollar amount remaining after deducting COGS from revenue. Gross margin is that amount expressed as a percentage of revenue. If revenue is 500,000 dollars and COGS is 200,000 dollars: gross profit = 300,000 dollars and gross margin = 60%. Use gross profit for absolute financial planning and gross margin for benchmarking and tracking pricing efficiency over time.
