Profit Margin Calculator
Calculate the profit margin of a product or service from its cost price and selling price, to see what percentage of each sale stays as actual profit.
Results
Profit (€)
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Margin %
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Margin % = (Selling Price - Cost Price) / Selling Price × 100
Profit Margin Calculator
Confusing "margin" with "markup" (or margin on cost) is one of the most common mistakes when setting prices, and it can lead to miscalculating a business's real profitability. This calculator gives you the profit margin on the selling price, which is the metric that shows what percentage of every euro billed stays as gross profit.
The formula is: margin % = (selling price − cost price) / selling price × 100. For example, a product that costs €40 and sells for €60 has a margin of (60−40)/60 × 100 = 33.3%, even though the markup on cost is 50% ((60−40)/40 × 100). This difference between margin and markup is the source of many pricing errors when working backward from a profitability target.
To set a price that guarantees a target margin, the formula is reversed: selling price = cost price / (1 − target margin/100). If you want a 40% margin on a €30 cost, the selling price must be 30 / 0.6 = €50, not 30 × 1.4 = €42 (which would only give a 40% markup, equivalent to a 28.6% margin).
The margin calculated here is the gross margin, before subtracting overhead (rent, staff, marketing) and taxes. A healthy gross margin doesn't guarantee net profit if fixed costs are high relative to sales volume; for that, pair this calculation with a break-even analysis.
Preguntas frecuentes
What's the difference between margin and markup?
Margin is calculated on the selling price; markup (margin on cost) is calculated on the cost price. For the same product, the margin percentage is always lower than the markup percentage.
How do I calculate the selling price to reach a target margin?
Divide the cost price by (1 − target margin/100). A €25 cost with a 20% target margin gives a selling price of 25/0.8 = €31.25.
Does this margin include taxes like VAT?
No, it's calculated on net cost and selling prices, excluding value-added tax, which is handled separately according to each country's rules.
What's considered a good margin?
It varies a lot by industry: retail typically runs 20-50% margins, while services or software can exceed 70-80% thanks to very low variable costs.
Is gross margin the same as net profit?
No. Gross margin only subtracts the direct product cost; net profit also deducts overhead, salaries, and taxes.
How does a discount affect the margin?
A discount reduces the selling price without reducing the cost, so the margin drops more than it might seem at first glance; recalculate it after applying any discount.
Can I use this for services, not just physical products?
Yes, the formula works just as well: replace "cost price" with the total cost of delivering the service (time, materials, subcontracting).
Why doesn't a 50% markup give me a 50% margin?
Because markup is calculated on cost and margin on the selling price, which is always higher than the cost; a 50% markup equals a 33.3% margin.