Calculate profit margin, markup percentage, and cost breakdowns. Switch between margin and markup modes for flexible pricing analysis.
Profit Margin
Revenue
$100.00
Profit
$40.00
Cost
$60.00
Markup
66.67%
A product costing $60 sold for $100 has a 40% margin ($40/$100) but a 66.7% markup($40/$60). These two metrics describe the same profit differently. Confusing them can lead to pricing errors: setting a “50% margin” when you mean 50% markup prices the product at $120 instead of $90 — a 33% price difference.
Profit margins vary dramatically by industry. Grocery stores operate on 1–3% net margins. Software companies average 20–30%. Luxury goods reach 60–70%. Restaurants typically target 3–9% net margin with a 28–35% food cost ratio. Knowing your industry benchmark helps you set competitive yet profitable prices. A restaurant pricing dishes at 30% food cost means a $6 ingredient plate sells for $20.
To convert between the two: Margin = Markup / (1 + Markup) and Markup = Margin / (1 − Margin). A 50% markup equals a 33.3% margin. A 50% margin equals a 100% markup. The margin can never exceed 100% (you cannot profit more than your revenue), but markup has no upper limit — luxury items may carry 300–500% markup.
Gross margin only subtracts direct costs (COGS). Net margin subtracts all expenses including rent, salaries, marketing, and taxes. A company with 60% gross margin and 10% net margin spends 50% of revenue on operating costs. Tracking both reveals whether profitability issues stem from pricing (low gross margin) or overhead (large gap between gross and net).
Use margin when analyzing financial statements or comparing profitability across companies — it is the standard in accounting and investor reporting. Use markup when setting prices from cost — it is more intuitive for pricing decisions. Retail buyers typically think in markup; CFOs and analysts think in margin.
It depends entirely on industry. A 5% net margin is excellent for grocery (Walmart averages 2.4%). Below 20% would be concerning for SaaS (industry average is 25–30%). A 10% net margin is generally considered healthy across most industries. Compare against direct competitors, not cross-industry averages.
Higher volume typically improves margins through economies of scale — fixed costs (rent, equipment) are spread across more units. A bakery selling 100 loaves at $5 with $200 fixed costs has a $3 margin per loaf. At 500 loaves, fixed cost per loaf drops from $2 to $0.40, increasing margin to $4.60 per loaf.