Profit margin shows how much of each dollar in revenue becomes profit after direct costs. Use this calculator to measure business profitability and compare pricing against your costs.
How to use this calculator
- Enter total revenue for the product, order, or period you are analyzing.
- Enter the direct cost (COGS) associated with that revenue.
- Review profit, margin percentage, and markup percentage.
- Read the interpretation for ways to improve margins.
Formula
Profit = Revenue − Cost. Profit margin (%) = (Profit ÷ Revenue) × 100. Markup on cost (%) = (Profit ÷ Cost) × 100.
Example
With $10,000 in revenue and $6,500 in cost, profit is $3,500 — a 35% margin and about 53.8% markup on cost.
Frequently asked questions
What is a good profit margin?
Margins vary by industry. Retail may run 2–10%, restaurants 3–15%, and software services often exceed 40%. Compare against your sector, not a universal benchmark.
Should I include overhead in cost?
This calculator uses direct cost only. Include labor, materials, and COGS. Allocate overhead separately for a full picture of operating profit.
What is the difference between margin and markup?
Margin divides profit by revenue. Markup divides profit by cost. A 25% margin equals a 33.3% markup.
Can margin be negative?
Yes. When cost exceeds revenue, you lose money on each sale. Review pricing and costs immediately.