Profit Margin Calculator

Profit as a share of revenue

The margin answers the only question a business can spend: after paying for everything, what share of revenue remains? Mechanically, profit is revenue minus total costs, and margin is profit ÷ revenue × 100 — revenue is always the base, never costs. That is what separates margin from markup, and conflating the two is the single most expensive confusion in small-business pricing: 35% margin is not 35% markup, and pricing built on the mix-up routinely pockets 5–15 points less than intended.

This calculator also surfaces markup on cost (profit ÷ cost) because, read side by side with margin, those two numbers explain why the same business can quote both "35% margin" and "53.85% markup" and be right both times. Use the page at the level where the decision lives: revenue minus costs as booked, or per-product for a price list review, or as the target margin when asking whether a discount still covers overheads.

A worked example, step by step

Problem: monthly revenue 2,400, total costs 1,560.

1. Profit: 2,400 − 1,560 = 840.
2. Base: revenue 2,400 (what came in the door).
3. Divide: 840 ÷ 2,400 = 0.35.
4. Convert: × 100 = 35% margin.
5. Cross-read: markup on cost is 840 ÷ 1,560 = 53.85% — the same business, the same profit, a different denominator.

When costs contain spend that scales with revenue (materials, transaction fees), running the calculation twice — once gross, once net of those — splits fixed structure from activity-dependent spend; that two-number habit is the difference needed to see where margin actually erodes when volumes shift.

The same profit read two ways

Read left to right: as margin rises, markup rises faster — at 50% margin on cost, markup is a full double. The larger the markup number, the more important the denominator being explicit.

From the number to the decision

Margins sharpen when the running costs get split. Run the page once with everything in (the 35% of the example), then stress-test the discount question before anyone proposes one: a 10% price cut with costs unchanged moves revenue to 2,160 and profit to 600, so the margin reads 27.78% — the same cost structure swallows a much larger share of a smaller base. That second reading is what a pricing meeting actually needs, because a margin was never free-floating: it belongs to a price and a cost block together, and it moves twice as fast as the price does.

For businesses selling across different lines, this page is happiest one call at a time: run it per product line, then let the revenue-weighted average of those margins describe the mix — doing the blend inside a single input would smear a 60% software line and a 30% services line across a base that says nothing usable. And strip VAT before the first call: a margin computed on tax-inclusive revenue is inflated by whatever rate your jurisdiction charges, which turns the tool into an audit finding rather than a result. The Break-even Calculator then answers where profit becomes real, which is the natural companion frame to any single-period margin claim.

Mistakes that fake the margin

• Quote based on gross revenue with VAT. The revenue belongs net of VAT; tax collected is treasury money, not your income.
• Forgetting owner hours. A margin built on unsalaryed hours overstates profit; include a real wage or compute hours separately.
• Comparing margins across different sectors. 12% in grocery and 12% in software are not equivalents; benchmark within your industry's runs.
• Markup stated as margin. "35% markup" and "35% margin" differ by a whole pricing grid; convert before pitching prices (see the table above).
• Discounts from the wrong side. A 20% discount and a 65% margin make 9% profit — verify the bottom line after the promotion rather than before it.

Keep exploring

• Markup Calculator — build the selling price from cost and a markup.
• Break-even Calculator — where fixed costs are exhausted, the natural counterpart of a margin review.
• Unit Price Comparison — compare supplier quotes per unit before the margin is calculated.
• Guide: Markup vs Margin.