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Profit Margin Calculator
Pricing your products correctly is the difference between a hobby and a business. Use this calculator to find your gross margin, markup, and profit.
Margin vs. Markup: The Battle of Percentages
If you take nothing else away from this page, remember this: Margin is not Markup. Confusing the two is the #1 reason new businesses underprice their products and lose money.
Expert Tip from David Chen, CFA
"I see this all the time: A business owner wants a 50% margin, so they mark up their product by 50%. Big mistake. If you buy for $100 and mark up 50%, you sell for $150. Your margin is only 33%. To get a 50% margin, you need to mark up 100% (sell for $200)."
The Formulas
- Gross Margin = (Revenue - Cost) / Revenue
- Markup = (Revenue - Cost) / Cost
Common Mistake: Forgetting Overhead
This calculator shows your Gross Margin. That's just the profit on the item itself. It doesn't include rent, salaries, marketing, or software. Your Net Margin will be much lower. Ensure your Gross Margin is high enough to cover all those other bills!