Margin is profit divided by the selling price
Profit margin answers how much of the selling price is profit:
(selling price − cost) ÷ selling price × 100
An $80.00 cost and a $100.00 price is $20.00 of profit, a 20% margin, and a 25% markup. Markup divides that same profit by the cost. Use the markup calculator when the percent should be of the cost. A 25% margin is not a 25% markup.
The SBA break-even guide writes contribution margin as (sale price − variable cost) ÷ sale price. The SBA glossary describes gross profit against net sales. This calculator uses that sales-base shape for the cost and price you type. It does not separate variable cost, overhead or net profit after expenses.
Two questions
- What price produces this margin? Selling price is
cost ÷ (1 − margin), rounded half up to the nearest cent. - What is the margin? The percent is
(price − cost) ÷ price × 100, rounded half up to six decimal places.
A 20% margin on a $100.00 cost is $125.00. A 25% margin on a $100.00 cost is $133.33 (the exact $133.333… rounds half up). A 99% margin on $100.00 is $10,000.00. A $0.00 cost and a $50.00 price is a 100% margin. A cost of $100.00 and a price of $75.00 is −33.333333%.
Limits
A typed margin of 100% or more is rejected, because dividing by zero is not defined. A computed price above $100,000,000.00 is rejected rather than clamped. A negative margin is not typed; it appears when cost is above the selling price. For a package comparison in one measure, use the unit price calculator.
Frequently asked questions
Why is a 25% margin more than a 25% markup?
Margin’s percent is of the selling price, so the profit has to be a quarter of
a larger number. On a $100 cost, 25% markup sells at $125 and 25% margin sells
at $133.33.
What if my cost is $0?
With a positive selling price, the margin is 100%. Asking what price a margin
percent would produce from a $0.00 cost is rejected, because that percent is
not defined.
Are prices sent to analytics?
No. Analytics may record that this calculator ran. The cost, price and margin
stay in the browser.
Sources & review
- Calculate your startup costs and break-even point — U.S. Small Business Administration
- Glossary of Business Financial Terms — U.S. Small Business Administration
Last reviewed: . The formula is reproduced above so you can check the math independently.
Educational estimate only. This is not net profit after overhead, tax or other expenses.