Personal finance · business
Profit margin calculator
Gross margin, net margin and markup from your revenue and costs, the three numbers to know before you price anything.
"It sold for $40" tells you nothing about whether you made money. Profit margin does. This turns revenue and costs into gross margin (after direct costs), net margin (after everything), and markup. And keeps markup and margin straight, which is where most pricing mistakes start.
Sales price × units sold.
Materials, manufacturing, shipping to the customer.
Platform fees, ads, packaging, software.
Enter your revenue and costs.
Worked example
$10,000 of revenue, $4,000 cost of goods, $1,500 operating expenses:
| Measure | Value |
|---|---|
| Gross profit | $6,000 |
| Gross margin | 60.0% |
| Net profit | $4,500 |
| Net margin | 45.0% |
| Markup on cost | 150.0% |
A 60.0% gross margin after product costs, 45.0% net after every expense, $4,500 of real profit. The 150.0% markup on cost describes the same pricing from the cost side; quoting one when you mean the other is how sellers accidentally underprice.
Questions
What's the difference between margin and markup?
Margin is measured on the selling price: (price − cost) / price. Markup is measured on cost: (price − cost) / cost. A 50% margin is a 100% markup. They describe the same price from two directions, and mixing them up underprices your product.
What's a healthy margin?
It varies by business, but for small e-commerce a gross margin of 40 to 60% and a net margin of 10 to 20% are common targets. A net margin under 5% leaves little room for a bad month.
Is this profit the same as taxable income?
Roughly, net profit is what flows to your Schedule C bottom line. But tax adds its own adjustments (the QBI deduction, self-employment tax, the home-office deduction). Use the self-employment calculators for the tax side.
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Business arithmetic; not tax or financial advice.