Margin Calculator (2024)

This margin calculator will be your best friend if you want to find out an item's revenue, assuming you know its cost and your desired profit margin percentage. That's not all, though; you can calculate any of the main variables in the sales process — cost of goods sold (how much you paid for the stuff that you sell), profit margin, revenue (how much you sell it for) and profit — from any two of the other values. In general, your profit margin determines how healthy your company is — with low margins, you're dancing on thin ice, and any change for the worse may result in big trouble. High profit margins mean there's a lot of room for errors and bad luck. Keep reading to find out how to find your profit margin and what is the gross margin formula.

We have a few calculators that are similar in nature — you can check out our margin and VAT calculator (or margin and sales tax) or margin with a discount calculator.

1. Find out your COGS (cost of goods sold). For example $\$30$$30.
2. Find out your revenue (how much you sell these goods for, for example, $\$50$$50).
3. Calculate the gross profit by subtracting the cost from the revenue. $\$50 - \$30 = \$20$$50−$30=$20
4. Divide gross profit by revenue: $\$20 / \$50 = 0.4$$20/$50=0.4.
5. Express it as percentages: $0.4 \cdot 100 = 40$0.4⋅100=40.
6. This is how you calculate profit margin... or simply use our gross margin calculator!

As you can see, the margin is a simple percentage calculation, but, as opposed to markup, it's based on revenue, not on cost of goods sold (COGS).

The formula for gross margin percentage is as follows:

gross margin = 100 × profit / revenue

(when expressed as a percentage). The profit equation is:

profit = revenue - costs

so an alternative margin formula is:

margin = 100 × (revenue - costs) / revenue

Now that you know how to calculate profit margin, here's the formula for revenue:

revenue = 100 × profit / margin

And finally, to calculate how much you can pay for an item, given your margin and revenue (or profit), do the following:

costs = revenue - margin × revenue / 100

All the terms (margin, profit margin, gross margin, gross profit margin) are a bit blurry, and everyone uses them in slightly different contexts. For example, costs may or may not include expenses other than COGS — usually, they don't. In this calculator, we are using these terms interchangeably, and forgive us if they're not in line with some definitions. To us, what's more important is what these terms mean to most people, and for this simple calculation the differences don't really matter. Luckily, it's likely that you already know what you need and how to treat this data. This tool will work as gross margin calculator or a profit margin calculator.

So the difference is completely irrelevant for the purpose of our calculations — it doesn't matter in this case if costs include marketing or transport. Most of the time people come here from Google after having searched for different keywords. In addition to those mentioned before, they searched for profit calculator, profit margin formula, how to calculate profit, gross profit calculator (or just gp calculator), and even sales margin formula.

Gross profit margin is your profit divided by revenue (the raw amount of money made). Net profit margin is profit minus the price of all other expenses (rent, wages, taxes, etc.) divided by revenue. Think of it as the money that ends up in your pocket. While gross profit margin is a useful measure, investors are more likely to look at your net profit margin, as it shows whether operating costs are being covered.

While a common sense approach to economics would be to maximize revenue, it should not be spent idly — reinvest most of this money to promote growth. Pocket as little as possible, or your business will suffer in the long term! There are also certain practices that, despite short-term profit, will cost you more money in the long run, e.g., importing resources from a country likely to be subject to economic sanctions in the future or buying a property that will be underwater in 5 years.

Your sales margin is the product of the selling price of an item or service, minus the expenses it took to get the product to be sold, expressed as a percentage. These expenses include: discounts, material and manufacturing costs, employee salaries, rent, etc.

Although both measure the performance of a business, margin and profit are not the same. All margin metrics are given in percent values and therefore deal with relative change, which is good for comparing things that are operating on a completely different scale. Profit is explicitly in currency terms, and so provides a more absolute context — good for comparing day-to-day operations.